Repo: An Under-Appreciated Asset*
Repo—repurchase agreements if you will—is both simple and complex. Simple because once documentation is in place it’s quite easy to place a trade using a secure message, a trading platform or even—heaven forbid— a phone call. We used to joke that it was as simple as pushing the repo button. But the complexity is around […]
If Not Treasuries, Then What?
The downgrade by Moody’s of the credit of the United States has some folks thinking about whether to continue to invest in Treasuries. If you are a public funds treasurer the answer seems pretty simple, though the reasoning may be a bit complex/convoluted. For one thing, for most public agencies investment authority is limited to […]
Does it Matter? Moody’s Rating Downgrade of U.S. Sovereign Debt.
Moody’s Ratings’ downgrade of the credit of the United States on May 16 is not a major market moving event. Rather it is a sign along the path we are on, a path of rising sovereign debt loads and ineffective efforts either to control the growth or pay the cost of government. The seeds of […]
The Debt Ceiling Game is On
The X Date is live. We now have an idea of the date on which the United States will run out of money unless the debt ceiling is raised or suspended. Treasury Secretary Bessent informed Congress last week that it would be in August, thus teeing up a made up “crisis” that occurs periodically, grabs […]
Beyond the News—TBAC: Treasury and the Bond Dealers Do a Kabuki Dance
TBAC, the Treasury Bond Advisory Committee, is an obscure body. Even those immersed in the fixed income markets may not pay it much attention. But four times a year this group of bond dealer representatives meets with Treasury officials to provide input into the government’s massive and growing debt issuance plans. It’s a kind of […]
Why Do Investors Discount Credit Risk?
The markets are awash in headlines about economic uncertainty and the rising prospect of recession, but these forces have barely moved measures of credit risk. Credit backed instruments are a significant part of public funds portfolios. The Federal Reserve estimates that state and local governments held $561 billion of commercial paper and corporate bonds at […]
Beyond the News: Risk, The New Obsession.
I’ve been thinking a lot about risk these days, and so should you. Some investment folks are paid to bet on risk (think hedge fund managers). For them, more risk is better—they just want to bet on the right side. But almost without exception public funds investors are expected to avoid risk, or at least […]
Something’s Up in Texas
Local government investment pools have flourished in Texas and its local governments have benefitted from the highly competitive marketplace that provides a myriad of options, many at very low cost. But recently the industry has attracted the attention of state legislators who have introduced bills that would alter the landscape, likely to the detriment of […]
The Week After
You can’t ignore the massive market selloff last week, even if cash pools and short-term fixed income portfolios escaped the worst. Equity markets bore the brunt, losing 10-15%. (That selloff continued this morning.) By contrast the fixed income markets seemed a calm and sheltered place. Yes, bond yields fell but the change in short term […]
New Bank CD Benchmarks Provide Transparency to The Market
The collateralized CD market has been a black box for public agencies, where useful information on rates has been hard to come by and public agencies are hampered in assessing relative value. We’ve created a series of new investment benchmarks to address this by tracking rates that banks pay for collateralized public funds deposits. It […]