Value of Irish Money Market Funds Decreased by €16 Billion in September
Net asset value of money market funds (MMFs) in Ireland decreased by €16 billion to €444 billion in September 2016, according to statistics on money market funds during the third quarter of 2016, released by the Central Bank on Tuesday, November 29. This decrease was largely driven by devaluations of the Sterling which makes up 43 percent of MMFs. Negative revaluations totalled €9 billion largely due to currency fluctuations.
The report aslo showed that total debt securities held by MMFs at end September 2016 amounted to €337 billion, compared to €353 billion at end June 2016. Net flows into euro area debt securities amounted to €5.2 billion over the quarter, with outflows in July of €6.3 billion more than offset by positive inflows over the rest of the quarter.
In September 2016, €53 billion of debt securities held by MMFs reported a negative yield (54 percent of which related to debt issued in euro area countries), compared to just €18 billion in September 2015.
The report also showed that a €14 billion transaction outflow in July was largely due to a re-domicile and merger of an Irish resident MMF into another euro area resident MMF.
For debt securities, there was an overall transaction decrease of €9 billion over the quarter. The largest outflow of €6.9 billion was from US debt securities, primarily US government debt. The largest increase was €2.1 billion in holdings of Dutch debt securities.
MMFs’ holdings of government debt securities decreased to €53 billion at end September 2016, from €68 billion at end June 2016. While US government debt accounted for 68 percent (€36 billion) of this total at end-September, it registered the largest quarterly transaction decreases of €6.3 billion over the quarter, occurring evenly across the quarter. MMFs continued to search for yield, reducing exposure to lower yielding government debt.
Net flows into euro area debt securities increased by €5.2 billion over the quarter, with outflows in July of €6.3 billion more than offsetting by inflows over the rest of the quarter. The largest transactions increases occurred with sterling denominated funds increasing holdings of debt issued by euro area banks by €5.7 billion. These reflected portfolio rebalancing within euro area assets, however. The largest transaction outflows occurred within sterling denominated funds, of €3.4 billion from debt holdings issued by euro area ‘other’ government (debt issued by local government and social security funds). Overall, euro denominated funds recorded the largest transaction inflows over the quarter of €2.9 billion.