Quarterly Letter to Members | |
Steady at the Helm: A Fourth-Quarter Perspective on Cash and Confidence
Publication produced by KeyBank Institutional Advisors
Key Takeaways
- The Federal Open Market Committee delivered three rate cuts totaling 75 basis points during the quarter, bringing the target range to 3.50%–3.75%.
- Money-market yields remained attractive, with short-term investments continuing to generate income while preserving liquidity.
- Market conditions remained orderly, supported by stable Treasury issuance and ample liquidity.
- The outlook favors patience, as yields remain well above pre-pandemic norms despite modest easing.
The fourth quarter of 2025 underscored an essential truth: stability is not achieved by reacting quickly, but by remaining disciplined when conditions change.
From October through December, financial markets focused squarely on the direction of monetary policy. Over the course of the quarter, the Federal Reserve implemented three rate cuts totaling 75 basis points, lowering the federal funds target range to 3.50%–3.75% by year-end. While the cumulative move was meaningful, the message accompanying it was deliberately cautious.
Chair Jerome Powell emphasized that these adjustments should not be interpreted as a return to highly accommodative policy. Inflation had moderated meaningfully, but economic growth remained resilient and labor markets tight. As a result, the Federal Reserve characterized the quarter’s actions as a recalibration toward neutral rather than the start of an open-ended easing cycle.
Despite the cumulative rate cuts, money-market yields remained attractive throughout the quarter, particularly relative to long-term historical norms. Overnight and short-duration instruments continued to generate meaningful income while maintaining a high degree of liquidity. Funding markets remained orderly, supported by the Fed’s administered rates, standing liquidity facilities, and a steady pace of Treasury issuance consistent with regular financing needs.
This environment rewarded conservative portfolio structures. Diversification, disciplined maturity ladders, and a continued emphasis on liquidity helped portfolios remain resilient during a period of policy transition. Rather than reacting to headlines or attempting to anticipate the precise timing of future rate moves, effective cash strategies remained focused on preserving principal, ensuring liquidity, and capturing income at the front end of the yield curve.
Looking ahead to 2026, the outlook suggests cautious optimism rather than urgency. While additional rate cuts remain possible, the Federal Reserve has been clear that future moves will be gradual and data dependent. Even so, yields remain well above pre-pandemic levels, continuing to offer a compelling combination of income and stability.
In an environment defined by uncertainty and shifting expectations, the fourth quarter of 2025 reinforced a familiar lesson: effective cash management is not about timing the market. It is about structure, discipline, and consistency.
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The Key Wealth Institute is comprised of a collection of financial professionals representing Key entities including Key Private Bank, KeyBank Institutional Advisors, and Key Investment Services. Any opinions, projections, or recommendations contained herein are subject to change without notice and are not intended as individual investment advice.
This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Bank and trust products are provided by KeyBank National Association (KeyBank), Member FDIC and Equal Housing Lender. Key Private Bank and KeyBank Institutional Advisors
are part of KeyBank. Investment products, brokerage and investment advisory services are offered through Key Investment Services LLC (KIS), member FINRA/SIPC and SEC registered investment advisor. Insurance products are offered through KeyCorp Insurance Agency USA, Inc. (KIA). KIS and KIA are affiliated with KeyBank.
KeyBank and its affiliates do not provide legal advice. Individuals should consult their personal tax advisor before making any tax-related investment decisions.
© 2025 KeyCorp. 230720-2172668-1268483519
INVESTMENT PRODUCTS ARE: NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE. NOT A DEPOSIT. NOT INSURED BY ANY FEDERAL OR STATE GOVERNMENT AGENCY
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Series I Recap
The month opened with a $929,354,980 share balance and closed with a balance of $853,076,234. The seven-day effective yield ended the month at 3.67%. The monthly seven-day average yield in December was 3.75%. Average maturity ended the month at 14 days.
As of December 31st, 2025, the Series I portfolio had 13% of its portfolio assets allocated to overnight investments/cash, corporate securities made up 10% of the assets, Commercial Paper represented 27%, CDs represented 9%, and Treasury & Agency represented 41%.
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Series II Recap
The month opened with a $111,645,948 share balance and closed with a balance of $112,004,606. The thirty-day SEC yield ended the month at 3.81%.
On December 31st, 2025, the Series II portfolio had 5% of its portfolio assets allocated to overnight investments/cash, corporate securities made up 36% of the assets, Commercial Paper represented 15%, CDs represented 13%, and Treasury & Agency represented 31%.
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Comparisons
On December 31st, 2025, the S&P AAA & AA Rated GIP Tax 30 Day Yield Index was 3.88%, the Series I Pool's 7-day SEC effective rate was 3.67%, and the Series II Pool’s 30-day SEC effective rate was 3.81%. All Pool rates are quoted net of fees and expenses.
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Angie Flick - President
City & Borough of Juneau
Cheyenne Heindel
Matanuska-Susitna Borough
Philip Hulett
Galena City School District
Kris Erchinger
City of Whittier
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Jody Tow - Vice President
Petersburg Borough
Sheryl Glasen - Treasurer
City & Borough of Juneau
Brennan Hickok
APRA
Nils Andreassen - Executive Director
Alaska Municipal League
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AMLIP Membership
If any of your local school districts or municipal agencies are interested in enrolling, please reach out to info@amlip.org.
91 Members Representing 236 Total Accounts
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Adak, City of
AIDEA
Akutan, City of
Alaska Association of Municipal Clerks
Alaska Govt Finance Officers Association
Alaska Municipal League
Alaska Municipal Management Association
Aleknagik, City of
Aleutians East Borough
AML/JIA
Anderson, City of
Angoon, City of
Annette Island School District
Atka, City of
Atqasuk, City of
Bethel, City of
Brevig Mission, City of
Bristol Bay Borough
Chevak, City of
Chuathbaluk, City of
Cold Bay, City of
Cordova, City of
Delta Junction, City of
Denali Borough
Dillingham, City of
Eagle, City of
Eek, City of
Egegik, City of
Elim, City of
Fairbanks North Star Borough
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Fairbanks, City of
False Pass, City of
Fort Yukon, City of
Galena, City of
Gustavus, City of
Haines, City and Borough
Homer, City of
Hoonah, City of
Huslia, City of
Juneau, City and Borough
Kachemak, City of
Kake City School District
Kenai Peninsula Borough
Kenai, City of
Ketchikan Gateway Borough
King Cove, City of
Kodiak Island Borough
Kodiak, City of
Kotzebue, City of
Koyuk, City of
Manakotak, City of
Marshall, City of
Matanuska-Susitna Borough
McGrath, City of
Mekoryuk, City of
Mekoryuk, Village of
New Stuyahok, City of
Nome, City of
North Pole, City of
Northwest Arctic Borough
Nulato, City of
Old Harbor, City of
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Nulato, City of
Old Harbor, City of
Palmer, City of
Pelican City School District
Pelican, City of
Petersburg School District
Petersburg Borough
Pilot Station, City of
Platinum, City of
Pribilof School District
Quinhagak, City of
Sand Point, City of
Selawik, City of
Seldovia, City of
Seward, City of
Sitka, City and Borough
Soldotna, City of
Southwest Alaska Municipal Conference
St. Paul, City of
Tenakee Springs, City of
Toksook Bay
Unalakleet, City of
Unalaska, City of
Upper Kalskag, City of
Utqiagvik, City of
Wasilla, City of
Whale Pass, City of
Whittier, City of
Wrangell School District
Wrangell, City and Borough
Yakutat, City and Borough
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Interested in enrolling one of your municipal agencies or school districts?
Contact us at info@amlip.org!
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Account information:
Brian Crosby
Vice President and Sr. Relationship Manager
216-689-5190
brian_crosby@keybank.com
Kris Nedwick
Vice President and Sr. Relationship Manager
907-564-0409
kris_nedwick@keybank.com
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Investment Related Questions:
Blake Phillips
Director of Institutional Solutions
907-646-3505
blake@apcm.net
Lindsey Cashman
Client Relationship Manager
(907) 646-3532
lindsey@apcm.net
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