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 […]
Uncertainty Ahead: Growth of Public Sector Investment Portfolios Slows, Liquidity Expands
• There are signs that the robust growth in state and local government investment portfolios in recent years is ending even as high interest rates generate strong internal portfolio growth. The recently-released Federal Reserve’s Financial Accounts report showed state and local government assets grew only 0.6% in the quarter ended March 31, 2024 and 4.3% […]
When the Tail Wags the Dog: A Word of Caution Related to Investing in CP and CDs
Commercial paper and negotiable certificates of deposit make up a minor portion of the universe of short-term securities held by public agencies, money market funds and other institutional investors. But because the market for CP/CDs has suffered from disruption during periods of market stress, it has the continued focus of prudential regulators. This is highlighted […]
What’s Good Is Good
Five months into the year, preferred investment strategies for public funds investors are performing quite well, thank you. Our updated Dashboard, with all of these details and a summary of the Security and Exchange Commission’s Money Fund Statistics is here. The cash strategy concentrates investments in LGIPs or money funds. Maximum flexibility and liquidity are […]
Is Crypto in Our Future?
Crypto is slowly making its way into the consciousness of mainstream investors, including those who invest public funds. One indication is the passage last week by the House of Representatives of FIT21 (the Financial Innovation and Technology for the 21st Century Act), though it is unlikely to become law in this Congress. Another is a (reluctant?) […]
Bank Regulation Meets Toxic Workplace Charges
Last week two Congressional committees responsible for the nation’s financial services held six hours of oversight hearings with leaders of the Federal Deposit Insurance Corporation, the Federal Reserve, and the Office of the Comptroller of the Currency. In normal times these hearings would have focused on the significant and controversial Basel III Endgame rules proposed […]
What Treasury’s Borrowing Plans Mean for State and Local Government Investors
A shortage of short-term Treasuries? Perhaps not, but after a rapid expansion of issuance that dominated the market in the past two years, three developments could make it feel like there aren’t enough short-term Treasuries to go around. Why it matters. State and local governments rely on Treasuries as the foundation for their portfolios, with […]
What’s With Bank Balances?
I’ve been puzzling over a surprising set of statistics. The Federal Reserve reports that in recent years state and local government balances in checkable deposits and currency have mushroomed and are now nearly three times greater than they were in 2019. At the same time assets in time and savings accounts have declined. In pre-pandemic […]