Federated Institutional Tax-Free Cash Trust (IS) FFTXX

Share Classes Product Type Asset Class Category
Mutual Fund Money Market Municipal/Tax Free ; Institutional
As of 09-30-2017

While geopolitical, social and environmental turbulence dominated US headlines in the third quarter, economic data largely avoided volatility and moderately improved. The progress was enough for the US Federal Reserve (Fed) in September to begin the long process of shrinking its massive balance sheet built up over years of quantitative easing. While the tapering that gets underway in October will be modest, it symbolizes the end of a decade of extraordinary accommodation following the financial crisis. However, policymakers did not raise interest rates in the reporting period.

The third quarter was beset with vigorous debate in the US over the removal of Confederate statues, the future of the Affordable Care Act, belligerent rhetoric by North Korea and the federal budget. But these were overshadowed by the ferociousness of enormous hurricanes that slammed Texas, Florida and the Caribbean in late August and September.

Nonetheless, the US economy continued to expand as business confidence rose, manufacturing accelerated, consumer sentiment improved and the labor market posted solid gains. Retail and auto sales disappointed and housing softened, but the overall narrative looking forward was positive.

In the equity markets, the major indexes repeatedly set new highs, bolstered by growth and expectations for tax reform. The corporate credit markets also performed well, while the Treasury yield curve flattened slightly.

Subdued inflation remained an issue. Although various price gauges rose slightly in September, they remained far below the Fed’s 2% target, in part due to wages not rising as much as has historically been the case in response to a tightening labor market.

During the three months ended Sept. 30, the 1-month London interbank offered rate (Libor) did not move materially, ending at 1.23%, while 3-month Libor rose from 1.30% to 1.33%. The 1-year MIG1 yield rose from 0.95% to 0.99%. The 7-day SIFMA Municipal Swap Index began the third quarter at 0.91%, dipped to 0.77% in mid-August and then rose to 0.94% to end the quarter. The short end of the U.S. Treasury curve rose over the quarter, with 1-month and 3-month Treasury yields rising from 0.89% to 0.97% and 1.00% to 1.05%, respectively.

Key Investment Team