The Public Funds Investment Institute posted a piece entitled, "Cash and Short-Term Portfolios Had Strong Returns in the First Half of the Year." It tells us, "LGIP yields have been locked around the Federal Funds rate. They are within a few basis points of their levels at the start of the year and likely will not move until the Fed changes its federal funds target. The challenge that LGIP managers face is that the money market yield curve has provided little advantage to extending maturities.... That is likely the reason managers have kept weighted average maturities in the low to mid 30-day range even if they believe the Fed will reduce rates later this year." The brief continues, "The spread between the PFII Prime LGIP Index and the government index has narrowed from 22 basis points in January to 16 basis points last week. Investing in commercial paper and negotiable CDs offers a smaller advantage than it did for much of 2023. Investors have once again discounted concerns about creditworthiness and liquidity and the risk premium for these instruments has shrunk." The site adds, "S&P reports that the stable value LGIPs it rates added about $35 billion in assets this year. As we noted in a recent Beyond the News piece, public unit investment assets are growing very slowly and managers seem to be favoring liquid investments like LGIPs with the objective of building liquidity in the face of financial uncertainty.... Separate portfolios have lagged cash, but returns have been solid. The PFII 1–3-year model portfolio returned 1.47% for the first six months of the year (that is an annual rate of 2.97%) and 4.93% for the prior 12 months. This lags returns on cash/LGIPs of 5.25% to 5.45%, but portfolios with maturities of two to four years -- the PFII model has a duration of 1.64 -- will maintain their income for a longer period if/when the Fed cuts rates."

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