Monthly Portfolio Statistics
December 31, 2025Market Commentary
US front-end markets closed the year in an unusually orderly fashion—which, in money-market terms, is a bit like turbulence-free airspace in December: appreciated but treated with suspicion. Year-end funding needs were completed, and activity shifted to day-to-day liquidity management with little urgency evident as we rolled through year-end. It was exceptionally quiet. Unlike prior years, term spreads have avoided significant seasonal widening. ABCP, in particular, failed to cheapen meaningfully, reflecting stronger balance sheet capacity and a notable absence of forced cash movements. While there were a few large prints, the overall tone has been steady rather than desperate; a meaningful change for investors accustomed to year-end funding drama.
Looking ahead, supply constraints are likely to drive incremental spread tightening in the new year, particularly in the 3–9-month sector. Early visibility into 2026 funding calendars suggests a relatively benign environment, aside from the seasonal patterns, encouraging selective extension further out the curve. Interest in ABCP remains strong, especially collateral programs (repo). Optimism is not exuberance—but in front-end markets, “functional” is high praise.
Treasury bill markets remain well bid, though positioning continues to be highly tactical and resolutely month-to-month. Issuance volumes have been substantial (Figure 1), and we expect continued net bill supply even outside of the typical first-quarter seasonal dynamics tied to tax refunds and April tax receipts. Dealers remain active, with desks regularly soliciting bids—suggesting no one ever quite feels “long enough” bills. Looking ahead, the Federal Reserve’s new Reserve Management Program could become a meaningful source of incremental T-bill demand in the new year. With The Fed’s Standing Repo Operations firmly embedded in the toolkit, and reserves, repo rates, and bill supply all interacting dynamically, the funding landscape has plenty of moving parts. Conditions remain orderly for now—but this is money markets, so vigilance remains mandatory.
Source: Bloomberg. As of 11/30/2025
From a policy perspective, inflation remains sticky enough to keep the Federal Reserve firmly in wait-and-see mode, while tariff uncertainty continues to loom in the background like an unresolved footnote. The labor market is more of a concern than it had been and a close read of the December jobs data will be telling. In our Global Market Outlook Forward with focus | State Street, we continue to expect a resilient but moderating US economy, with policy rates remaining restrictive for longer but gradually moving toward easing as inflation trends lower. We expect the next cut to come at the April FOMC meeting with two more after that. This is a more dovish view and one we think critical to allow for the growth forecast (2.3% YOY GDP ’26) we have penciled in. That backdrop for money markets reinforces the appeal of front-end carry, though entry points matter. In the near term we continue to favor the 4-month sector and one-year maturities north of 3.50% offer good value. We remain disciplined with our entry points, balancing income with flexibility.
Liquidity Fund
AUM for the fund rose significantly in December, driven by property tax receipts, rising from $2.811 bln to $3.849 bln, a ~37% increase. The yield of the fund continued to trend lower, dropping another 23 bps this month, to 3.81%. The fund’s yield continued to adjust to lower rates as the Federal Reserve again reduced administered rates in December by 25 basis points, the third such cut in 2025, to a range of 3.50% to 3.75%. The FOMC continues to signal that the risks to the labor market have picked up as the unemployment rate has moved higher, but they also remain cautious on the potential effects from inflation, and after 3 rate cuts, the committee views those risks as being more balanced, and the hurdle for more rate cuts has become higher as rates are viewed to be neither expansionary or contractionary. Credit curves have flattened as less future cuts are being priced in by markets, while spreads have widened slightly over the month, which is typical for year end. The market is currently pricing in the next full cut by the Fed in June, and 2.33 cuts by year end 2026, but the lack of data from the government shutdown has continued to make it more difficult for markets and the Fed to forecast the path of forward rates, leading to potential volatility over the timing and depth of future rate cuts. WAM (weighted average maturity) fell by 4 days to 36 days, and WAL (weighted average life) rose 1 days to 76 days, as positioning was maintained despite the asset inflows. The Floating rate exposure in the fund remained steady at around 24.8%. Exposure to Yankee CD’s remained steady at around 28%, Commercial Paper exposure rose slightly, and exposure to repurchase agreements rose to 28.5%. Liquidity ratio’s for the fund rose, with around 36.9% in 1 week liquidity, and 90 day liquidity near 67.7%.
Key Statistics
| Portfolio | |
|---|---|
| WAM (Weighted Average Maturity) | 36.37 |
| WAL (Weighted Average Life) | 76.35 |
| Distribution Yield (%) | 3.90 |
| 30 Day SEC Yield (%) | 3.87 |
| 7 Day Yield (%) | 3.82 |
| 7 Day Liquidity | 36.98 |
| 90 Day Liquidity | 67.72 |
| Average Credit Quality (S&P) | A-1 |
| Floating Rate Bonds (%) | 24.82 |
Sector Allocation
Historical Performance (Net%)
Short Term Fund
In December 2025, the Short-Term Fund posted a gross total return of 0.35% with income return contributing 0.33% and price return contributing 0.02%. Income return was the largest driver of total return. Treasuries was the largest contributor to income return, returning 0.24% in income return, followed by IG Credit (0.05%), ABS (0.03%), and government related securities (0.01%). For price return, Treasuries was the largest contributor at 0.02%.
Key Statistics
| Portfolio | Benchmark | Difference | |
|---|---|---|---|
| Duration (yrs) | 0.72 | 0.52 | 0.20 |
| Distribution Yield (%) | 3.96 | N/A | - |
| 30 Day SEC Yield (%) | 3.67 | N/A | - |
| Spread Duration | 0.14 | 0.13 | 0.01 |
| OAS (bps) | 8.01 | 10.63 | -2.62 |
| Wal to Worst (yrs) | 0.76 | 0.54 | 0.22 |
| Average Credit Quality (Mdy/S&P) | Aa2/AA | Aa2/AA | - |
| Floating Rate Bonds (%) | 3 | 4 | -1 |
Benchmark: BBG Short Term Govt/Corp Index
Sector Allocation
Monthly Total Return Contribution (Gross bps)
Historical Performance (Net %)
Medium Term Fund
In December 2025, the Medium-Term Fund posted a gross total return of 0.25% with income return contributing 0.35% and price return contributing -0.10%. Income return was the largest driver of total return. Treasuries was the largest contributor to income return, returning 0.24% in income return, followed by IG Credit (0.06%), ABS (0.04%) and government related securities (0.01%). For price return, Treasuries was the largest contributor at -0.12%, followed by IG Credit (+0.01%) and government related securities (+0.01%). With a longer duration profile and more duration risk, the impact of rates increasing was more acutely felt in the Medium-Term fund.
Key Statistics
| Portfolio | Benchmark | Difference | |
|---|---|---|---|
| Duration (yrs) | 2.12 | 1.82 | 0.30 |
| Distribution Yield (%) | 3.92 | N/A | - |
| 30 Day SEC Yield (%) | 3.62 | N/A | - |
| Spread Duration | 0.38 | 0.42 | -0.04 |
| OAS (bps) | 10.81 | 7.92 | 2.89 |
| Wal to Worst (yrs) | 2.29 | 1.92 | 0.37 |
| Average Credit Quality (Mdy/S&P) | Aa2/AA | Aa2/AA | - |
| Floating Rate Bonds (%) | 2 | 5 | -3 |
Benchmark: ICE BoA Govt/Corp 1-3 yr (ex BBB)