Fitch: LGIPs $413 Billion in Q1'21
Fitch Ratings posted the report, "Local Government Investment Pools: 1Q21." They tell us, "In a continued effort to expand the dataset on local government investment pools (LGIPs), Fitch has added 16 LGIPs to our indices, with approximately $32 billion in assets as of 1Q21. The indices now track 62 pools with $413 billion in total assets. Assets for the Fitch Liquidity LGIP Index increased by $7 billion QoQ and $48 billion YoY, to $308 billion. The 2.5% QoQ increase is lower than the 5.5% average increase in 1Q over the last three years. Assets for the Fitch Short-Term LGIP Index decreased by $2 billion QoQ and increased by $14 billion YoY, to $104 billion. The 1.9% QoQ decrease is lower than the 2.1% average decrease in 1Q over the last three years. Fitch expects LGIP asset levels to remain elevated in the near future, potentially offsetting some of the typical seasonal outflows seen in the late summer months, as state and local governments continue to receive direct federal funding from the American Rescue Plan. In addition, increases in sales tax revenue should benefit localities that are dependent on tourism and business travel as more states continue with their re-opening plans." Fitch continues, "Net yields for both Fitch LGIP indices continued to fall QoQ, marking the eighth straight quarterly decline, albeit at a slower relative decline than previous quarters. The Fitch Liquidity LGIP Index ended the quarter with a net yield of 0.06%, outpacing the average institutional prime MMF 7-day net yield of 0.03%. The Fitch Short-Term LGIP Index ended the period with an average net yield of 0.63%, dropping 1.05% from a year prior as managers continued to reinvest maturing securities at lower yields. LGIP managers have continued to cautiously extend their interest rate exposures in this low rate environment, with the weighted average maturity of the Fitch Liquidity LGIP Index increasing to 49 days (+7 days YoY) and the duration of the Fitch Short-Term LGIP Index ticking up slightly higher to 1.29 years (up from 1.27 at the end of 1Q20). Allocations to Treasuries decreased as the supply in that segment has reduced, and instead LGIPs have been leaving more cash in money funds and bank deposits." (Note: Fitch is hosting an "LGIP & Public Funds Short-Term Market Update" webinar this Thursday, June 17, at 3pm EDT, following Crane Data's "Asian Money Fund Symposium," Thursday at 10am-12pm Eastern. Fitch's Greg Fayvilevich will be joined by San Bernardino County's Parth Bhatt and RBC's Mark Hernandez "to discuss recent trends in short-term markets, focusing on LGIPs (local government investment pools) and other public sector investors.")
