Waiting for the Fed
Next week’s meeting of the Federal Open Market Committee will set the tone for the markets for the next several months. In one sense it may be a non-event: investors have coalesced around the view that the central bank will cut the main policy rate by 25 basis points to 4.25-4.50%. This would push government-oriented […]
Uncertain Times: Liquidity May Be More Valuable Now than Ever
Investment managers often talk about the cost of excess liquidity. But liquidity may also have value. The value can be realized as ready cash to make up for unplanned shortfalls in revenue or acceleration in spending , or to take advantage of a rise in interest rates that increases earnings potential from re-investments. Liquidity management […]
Hole in the Bucket? State and Local Government Portfolio Growth Slows and May be Pressured by Rate Declines
If you are managing (or overseeing) public funds these days, you might feel as if you are tending a bucket with a hole in it. With interest rates at their highest level in decades earnings are flowing into portfolios at a strong rate. But Federal Reserve data show asset growth recently has slowed. The reason? […]
PFII Files Comments with FDIC Urging Reform of Insurance for Public Agencies
Earlier this week we filed formal comments with the Federal Deposit Insurance Corporation advocating for reform of the bank insurance program to raise limits on insurance and reduce the need for collateral to secure public deposits. The filing, in response to an FDIC Request for Information, is accessible here. Raising the limit for public units […]
Changing Local Government Investment Pool Managers: Replace the Manager or Create a New LGIP?
This LGIP Just Changed Managers. LGIPs rarely change managers. Sure, when a manager is sold this is viewed as a change under Federal law and triggers client approval, but the sale is usually described as “new owner, same dedicated employees.” Advisory agreements are normally renewed when they expire, perhaps with the board undertaking some diligence […]
How Far/How Fast: The Path for Pool Yields is Lower
The Federal Reserve is on the cusp of cutting rates. That much is crystal clear. When it does—most likely starting at its meeting September 18-–the yields on LGIPs and money funds will decline as well. How far and how fast will they fall? Here is a perspective on that question: LGIP and money fund yields […]
Why [Some] Investors Seem to Ignore The likelihood of Lower Rates Ahead
The path ahead for interest rates seems clear: the Federal Reserve will soon begin to reduce its policy rate, bringing down short-term rates generally. This has been the outlook for a couple of months, with only the timing and magnitude of cuts in question. Meanwhile money market fund assets grew steadily this year and are […]
Slow Progress: The Opportunity to Expand FDIC Insurance for Public Units
In the aftermath of last year’s bank crisis there were calls to reform federal deposit insurance to add stability to the banking system and diminish the risk of runs on smaller community banks. Deposit reform could also improve the banking environment for state and local governments if they organize around this issue and raise their […]
What the Big Bond Market Rally Means for Public Funds Investors
Last week’s big decline in interest rates feels a lot more real than the similar move at the beginning of the year. If so, what does it mean for public funds investors? The rally in bond prices boosted the returns on our 1–3-year model portfolio ahead of cash returns for the first time in several […]
Is Texas a Model of a Public Funds Investor-Friendly Market?
Texas could be the model for an investor-friendly public funds investment market, with a robust state-sponsored local government investment pool and a number of sizable alternatives that provide public funds investors competitive choices, low fees, risk guardrails and significant disclosure requirements. The details. Texas is the second most populous state, and with 5,500 local governments […]