TX-FIT COVID-19 UPDATES
Water Walker Investments has taken the following steps to ensure there is no disruption in the service you have come to expect due to COVID-19 (Coronavirus).
In this time of uncertainty, our top priority is to protect the well-being of our participants, service providers, employees, and the community at large while continuing to deliver seamless service to our local government participants. The Board of Trustees is closely monitoring the situation and will seek guidance through the World Health Organization, Centers for Disease Control and Prevention, government health officials, State, City and County government officials where our participants and service providers are located.
WATER WALKER UPDATES
- Water Walker Investments and its third party providers are all taking the necessary steps to support the services on which you depend. As part of our annual compliance auditing, Water Walker Investments tests its ability to execute all necessary functions from remote locations to ensure each department can function from any location.
- Our business continuity plan is fully tested and includes processes for a pandemic, natural disaster, and other unexpected events. We have teams prepared to complete work, so your service is not impacted.
- In the event of an office closure, the firm will implement its disaster recovery procedures which allow for our entire team to be offsite and equipped remotely with access to all systems and working documents. In the event this occurs, we have robust plans in place to continue to provide our clients with excellent service.
- Any operational disruption or office closure will not impact the liquidity of the U.S. FIT pools.
EFFECT ON THE MARKET
TARGET FED FUNDS RATE DROP (NOW 0-0.25%)
What is the value of an LGIP in a time like this?
Participants will see rates continue to drop due to the current health and economic stressors, however LGIPs continue to be an excellent option to other money
market alternatives, bank deposits, and money market accounts during this environment.
What will happen to the Earnings Credit Rate (ECR) and interest rate on excess reserves (IOER) at my bank accounts?
With the target fed funds rate between 0 and 0.25%, do not expect banks to pay any interest on excess reserves. Most banks will supply a floor on the Earnings
Credit Rate (ECR). This rate is subject to negotiation and may start as low as 0.25%. The lower ECR will require you to keep higher balances at the bank to offset
service charges. For example: If your ECR rate was 1.25% prior to the latest TFF reduction and you maintained a $3 million bank balance to offset all service
charges, a lower ECR of 0.25% will necessitate a $15 million bank balance to offset the same service charges.
We stand ready to help you in assessing your bank compensation structure.
Our portfolio management team remains focused on the pool’s two primary objectives: liquidity and safety during these uncertain times. The Federal Reserve and U.S. government have provided stimulus designed to supply liquidity and stabilize the functioning of all financial markets. Early in March, the Fed implemented multiple monetary stimuli to the markets. One strategy is to provide a “funding backstop” to facilitate the issuance of term commercial paper. As investors seek to build cash and increase liquidity, issuers can rely on the FOMC to participate as a buyer in the U.S. commercial paper (CP) the Treasury and mortgage backed securities markets to stabilize the credit facilities and enhance liquidity in the markets.
We sincerely appreciate your ongoing trust in Water Walker Investments and wish everyone safety and health during this challenging time. We will continue to provide updates as this situation warrants.