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 […]
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 […]
New Research Report Details the Role of State-Sponsored Local Government Investment Pools as the Foundation of a $900 Billion Industry
A new research report by the Public Funds Investment Institute details the role of state treasurer-sponsored local government investment pools as a foundation of the $900 billion industry that provides money market-like investments to state and local governments. State treasurers in 32 states offer these funds and their assets total nearly $700 billion. Local-sponsored LGIPs with an estimated $200 billion […]
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 […]
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 […]
A Big Week for the Bond Market
It is a big week for the bond market with a slew of economic releases (jobs, consumer confidence and a few inflation measures), the Federal Open Market Committee meeting (Tuesday/Wednesday) and investors desperately seeking direction. Public sector investors have a constrained universe: they do not generally invest in equities (though a few do), and their […]
The Little Engine that Couldn’t: The Demise of BSBY
The details. After the Great Recession regulators determined to replace LIBOR as the dominant index to link floating rate securities. LIBOR was meant to represent the rate on unsecured obligations (commercial paper, corporate notes, bank loans, etc.) It had grown over its 40-year life to be the dominant market index, and as such had great […]