Q2 2026 market review
In Q2 2026, euro interest rate markets remained sensitive to European Central Bank policy expectations and geopolitical developments. The Gulf situation dominated headlines in April, with markets reacting nervously to oil prices and broader news flow. A fragile mid-month ceasefire reduced the likelihood of an April rate increase, although uncertainty over the ECB’s near-term policy path persisted as inflation pressures remained uneven. In May, markets stayed cautious, with value beyond three months limited as investors balanced inflation risks against signs of slower momentum. By June, Gulf tensions had eased, with a peace deal in principle between the US and Iran helping reduce geopolitical risk premium. Short-dated euro rates continued to reflect uncertainty around the ECB’s reaction function, inflation persistence and renewed volatility.
Daily horizon: ILF EUR Liquidity Fund
LATEST LIQUIDITY FACTSHEET
3 months+ horizon: ILF EUR Liquidity Plus Fund
Day-to-day spending needs
Highly liquid
Target weighted average maturity 30-45 days
Fund rating: S&P-AAAm, Fitch-AAAmmf
Fund type: LVNAV/STMMF
+0.13%
ILF EUR Liquidity Fund gross yield versus ECB deposit facility rate
LATEST LIQUIDITY PLUS FACTSHEET
Q2 2026 market review
In Q2 2026, euro interest rate markets remained sensitive to shifting European Central Bank policy expectations and geopolitical developments. The Gulf situation dominated headlines in April, with markets reacting nervously to oil prices and broader news flow. A fragile mid-month ceasefire reduced the likelihood of an April rate increase, although uncertainty over the ECB’s near-term policy path persisted as inflation pressures remained uneven. In May, markets stayed cautious, with value beyond three months limited as investors balanced renewed inflation risks against signs of slower momentum. By June, Gulf tensions had eased, with a peace deal in principle between the US and Iran helping reduce some geopolitical risk premium.
Intermediate reserve
Liquid
Target weighted average maturity: 30-120 days
Fund rating: Fitch-AAAf/S1
Fund type: VNAV STBF
WKN: A2PKR6
+0.16%
ILF EUR Liquidity Plus Fund gross yield versus ECB deposit facility rate
Fund activity
Fund activity over the quarter remained focused on high liquidity and a conservative maturity profile. Activity was concentrated in shorter-dated maturities, with selective fixed-rate additions further out the curve, including Barclays Bank plc, DZ Bank, Skandinaviska Enskilda Banken and Nordea. A Goldman Sachs holding was added where relative value was attractive, while small floating-rate positions were added in OPBank March 2027 and DBS one-year paper. Overall, the Fund continued to emphasise liquidity and careful issuer selection.
Source: European Central Bank, Insight Investment, as at 30 June 2026.
Source: European Central Bank, Insight Investment, as at 30 June 2026.
Fund activity
Fund activity focused on maintaining high liquidity while selectively adding value where compensation was attractive. Activity was concentrated in shorter-dated maturities, although fixed-rate additions were made out to six months, including National Australia Bank and BRED Banque. The Fund also added marginal floating-rate exposure, including Sumitomo Mitsui Banking Corporation three-year paper. In the AAA securitised space, additions included German card issuer Advanzia, a two-year CARS auto deal and First Ireland Auto securitisation. Performance was ahead of benchmark, supported by stabilising rate markets and spread retracement in floating-rate assets.