Let’s face it, markets are fickle.   Just when you were getting used to earning four to five times the interest earnings you were accustomed to, you start seeing CD, T-Bill, ECR, MMDA, and LGIP rates flatten, or possibly even decline over previous months for the first time in over a year.

What’s happening?

A Plateau in Rates - Now What?

The short answer is: short-term rates are rising because they are more closely linked to Fed actions. With the current high-end Fed Funds target rate at 2.50%, it’s no surprise why the 1-month T-Bill rate is currently at 2.47%.  Long-term rates are flattening because investors aren’t sure when the Fed’s next move will be, which is also a good indication of why the 1-year T-Bill is currently at 2.48%.  Again, investors aren’t sure what the Fed’s next move is.

So, what do you do?  Understand that interest rates will always be on the move.  For those entities that locked-in higher rates by investing using time-horizon data, you were able to ensure your taxpayers earned anywhere between 2.60%-2.70% for monies stress tested and available for 6+ months.

The good news is that in today’s market, it’s never too late to take advantage of opportunities in the yield curve.  Here are three ways you can earn and save more for your taxpayers despite a flattened yield curve:

1.) Identify how much you’re earning on ALL money. Don’t solely focus on the strategic liquidity you have for specific time horizons but also the operating dollars being used to satisfy payroll, A/P, etc.  It’s a fallacy that only time deposits can help close the gap for the taxpayers.  If you’re like most of the entities with whom I work, you’re also looking at earning on demand deposits, too.

2.) After analyzing each bank account and identifying where your longer-term opportunity lies, save yourself the time and trouble of rolling 30-day CDs every 30-days.  If the data suggests you have time-horizon capability, use that strategic liquidity to your taxpayers’ advantage.  We do not advocate public finance officials play the markets’ games.  Err on the side of being as proactive and safe as possible.  Keep in mind, the Chicago Mercantile Exchange’s FedWatch tool has a 47.8% probability of at least one rate cut by 1/29/2020.  Now is the time to be proactive.

3.)You cannot underestimate the power of technology.  Before you make up your mind that all technology is bad, consider this – with your competing priorities and time constraints, can you affordto save time and achieve better results with technology? Utilize the right bank technologies for you (the right technologies for you).  Adopt AND adapt to new technological investment opportunities in the marketplace.  If your investment strategy hasn’t changed in a decade, then I would seek an objective party to provide perspective for you.