Fitch: LGIPs Grew to $448B in Q4
Fitch Ratings published "Local Government Investment Pools: 4Q21," which tells us, "Fitch Ratings' two local government investment pool (LGIP) indices experienced asset increases in the fourth quarter of 2021 (4Q21). This gain was driven by the tax collection season and follows seasonal asset losses during 3Q21. Much of the coronavirus-related stimulus moneys deposited by public sector entities into LGIPs since the pandemic began have been withdrawn for earmarked projects. Combined assets for the Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index were $448 billion at the end of4Q21, representing increases of $34 billion qoq and $58 billion yoy. The Fitch Liquidity LGIP Index was up 5% qoq and the Fitch Short-Term LGIP Index was up 17% qoq, compared to average growth of 9% and 17%, respectively, in the fourth quarter over the past three years." The report explains, "The Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index ended the quarter with average net yields of 0.05%, an increase of 1 basis point (bp) qoq, and 0.59%, down 1 bp qoq, respectively. Compared to the previous quarter, yields remain relatively unchanged; however, Fitch expects market yields next quarter to increase more rapidly as monetary policy tightening begins with expectations for multiple rate hikes in 2022. Rates have already begun to rise given such market expectations, with three-month U.S. Treasury bills yielding 0.32% as of March 1, 2022, up from 0.06% as of Dec. 31, 2021." Fitch adds, "The trend of longer weighted average maturities (WAMs) and durations observed in recent years is beginning to reverse as interest rate increases approach. The WAM of the Fitch Liquidity LGIP Index decreased to 45 days, down three days qoq but still higher than money market funds (MMFs) at 34 days, while the duration of the Fitch Short-Term LGIP Index ticked down to 1.18 years, a small decrease from 1.29 years at the end of 3Q21. Fitch expects durations to continue to decline."
