|
For the quarter in review the FTIF Templeton Euro Liquid Reserve Fund generated a positive return of 0.22%.
During the period, the 3-month Euro Benchmark yield was relatively unchanged from the prior quarter at 2.16%
and the 6-month yield declined slightly to 2.16% from 2.17%.
The European Central Bank (ECB) left interest rates unchanged at 2.00% during the quarter amid declining growth
expectations and mixed inflation data. Fourth quarter data released during the month showed the Euro Area
economy slowed further to 1.6% y/y from 1.8% in the third quarter and 2.1% in the second quarter. Weakness was
particularly evident in the German economy, with real GDP growth declining 0.2% from the third quarter. The
European Commission lowered their 2005 growth forecast to 1.6%. Additionally, while headline inflation remained
slightly above the ECB's target, core inflation rates slowed significantly in the first quarter. The lack of underlying
inflation pickup in the Euro Area is unsurprising given the weak domestic economy along with the strength in the
currency containing tradable goods prices, such as oil.
Given a relatively slow pace of economic growth and a soft labor market, we anticipate underlying inflation
conditions to remain tempered and hence, the Euro Area will lag other major central banks in tightening monetary
policy into the current global economic cycle. As of quarter-end, the Fund's actual days to maturity were 49 days,
compared to 29 days at the end of the prior quarter. The Fund consists of high quality money market securities
with maturities ranging from overnight to one-year, with 23.03% in cash and cash equivalents, 0% in corporate
debt and 76.97% developed sovereign government/agency debt.
|
