THE SHORT ANSWER
TexPool's FAQ lists bond proceeds as an invested asset type, under Texas law: a rule, order, ordinance or resolution must specifically authorize the particular pool, and the pool must stay continuously rated no lower than AAA or AAA-m or an equivalent. The pool seeks a $1.00 value, deducts its fee from earnings and allows withdrawals any business day, but fixes no rate for a term; a competitively bid agreement is built to do that.
Whether a Texas issuer should keep bond proceeds in TexPool comes down to what the fund's draw schedule needs, who keeps the arbitrage records, and what providers would bid for the same money on a stated term.
TexPool supplies Texas oversight, a $1.00-per-share target and business-day access; a competitively bid agreement supplies a rate fixed for a term and withdrawals matched to the draws.
What is TexPool, and who can invest in it?
TexPool is a Texas public funds investment pool organized in 1989, overseen by the Texas Comptroller of Public Accounts, with Federated Hermes as full-service provider managing the assets, providing participant services and arranging custody under contract with the Comptroller.
It runs two pools, TexPool and TexPool Prime, and the pool's October 2026 FAQ counts more than 3,000 participating entities with about $32.5 billion in assets as of September 30, 2026.
Both pools seek to maintain a $1.00 value per share, which the pool's site says the Texas Public Funds Investment Act requires, and the pool's materials state it is possible to lose money by depositing money in the pool.
The Public Funds Investment Act, Texas Government Code Chapter 2256, governs how state agencies, local governments and investment pools in the state invest their funds.
Under §2256.016(a), an entity invests in a public funds investment pool only where a rule, order, ordinance or resolution specifically authorizes the particular pool, and §2256.019 requires the pool to stay continuously rated no lower than AAA or AAA-m or an equivalent rating by at least one nationally recognized rating service.
The pool's October 2026 FAQ lists bond proceeds among the asset types it invests, alongside operating cash and state aid, and lists an AAAm rating by S&P Global Ratings among its benefits; there is no minimum balance and no limit on the number of accounts.
The rest of the state's list is on the Texas permitted investments page.
How is TexPool's yield set, and how has it moved?
The documents reviewed for this page describe the yield as a current rate published on the pool's home page, with no rate fixed for a stated term.
TexPool invests only in U.S. Government securities, repurchase agreements collateralized by them and AAA-rated no-load money market funds, with commercial paper and certificates of deposit also available to TexPool Prime.
How it has moved is a daily question: the pool's home page carries the current figure, and mGIC's daily updates track today's reinvestment rates, with Treasury yields, SOFR and SLGS links each business day.
The fee side is fixed: TexPool's fee is 0.045% annually and TexPool Prime's is 0.055%, calculated daily and deducted from interest earnings, with rates quoted net of fees, per the pool's site as of October 6, 2026, which says the fees stay fixed for the term of the Federated Hermes management contract.
How does arbitrage and rebate tracking work for proceeds held in a pool?
TexPool's documents describe no arbitrage or rebate reporting service: the FAQ lists bond proceeds among the asset types invested, next to operating cash and state aid, and a list of asset types is not a statement about yield restriction or rebate treatment.
The state layer comes first: §2256.0208 lets a local government's investment officer invest bond proceeds or pledged revenue only to the extent the Public Funds Investment Act permits, in accordance with the statute governing the debt issue and the entity's investment policy for that issue.
State authorization answers an eligibility question, not the federal one: whether proceeds in the pool stay within an issue's yield restriction and rebate position is concluded by bond counsel and tax counsel; the mechanics are on the arbitrage rebate and yield restriction pages.
The recordkeeping rules name their owners: §2256.023 requires a written investment report from the investment officer at least quarterly, and §2256.008 requires the treasurer, chief financial officer and investment officer of a local government to complete at least 10 hours of PFIA training within 12 months of taking office, then 10 hours each two-fiscal-year period, or 8 hours for school districts and municipalities, with exceptions for some smaller entities and for entities that invest only in deposits or certificates of deposit.
What each state's pools say about this is documented pool by pool on the local government investment pools page.
Liquidity: same-day pool access or a draw-matched agreement?
Same-day access is the pool side of the answer: deposits and withdrawals can be made on any business day, transactions can be scheduled up to 90 business days ahead on TexConnect Online, and interest accrues daily, paid monthly.
A competitively bid agreement trades some of that openness for a structure built to the draw schedule: Treas. Reg. §1.148-1(b) counts a nonpurpose investment with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate within the guaranteed investment contract definition, so an agreement with withdrawals negotiated to a project's draws and a negotiated rate is the kind of investment that definition describes.
Whether a particular repo falls inside that definition is a determination for bond counsel.
What changes at closing is who writes the withdrawal rules: the contract, not a pool document, sets when money leaves and on what terms, the subject of the GIC withdrawal provisions page.
| TexPool | Draw-matched agreement | |
|---|---|---|
| When money moves | Any business day, or up to 90 business days ahead by request | Per the contract's negotiated withdrawal provisions |
| Rate | Current pool rate, quoted net of fees | Fixed when bid, negotiated for the fund |
| Term | No stated term in the pool's materials; withdrawable any business day | Stated term, sized to the drawdown |
| Who writes the terms | The pool's documents and its oversight body | The bid specifications and the winning provider's contract |
Neither shape wins on its own; the comparison only means something against a draw schedule and an arbitrage position.
When does a GIC, flex repo or Treasury portfolio beat TexPool?
Not automatically: each trades something against the pool's same-day profile, and Texas law attaches specific conditions to each for bond proceeds.
A guaranteed investment contract is expressly authorized for Texas bond proceeds when it has a defined termination date, is secured by U.S. or agency obligations at least equal to the bond proceeds invested, and is pledged and deposited with the entity or a third party it selects and approves, under §2256.015(a), an authorization covering bond proceeds rather than operating funds.
Texas bars a bond-proceeds GIC with a term longer than five years from the bonds' issue date, except for reserves and funds maintained for debt service purposes, under §2256.015(b).
§2256.015(c) adds the procurement conditions: specific GIC authorization in the bond order, ordinance or resolution, bids from at least three separate providers with no material financial interest in the bonds, purchase of the highest-yielding qualifying bid, a price reflecting the reasonably expected drawdown schedule, and a provider certification of administrative costs reasonably expected to be paid to third parties.
Those state conditions sit separately from the federal fair-market-value safe harbor, Treas. Reg. §1.148-5(d)(6)(iii), which treats a GIC's purchase price as fair market value on the purchase date when all its requirements are met; meeting them is a valuation presumption, not a legal conclusion about the issue.
A full-flex repurchase agreement runs through the state's repo provision instead: §2256.011 authorizes repos that are fully collateralized with a defined termination date, secured by cash and U.S. or agency obligations pledged and held in the entity's name with the entity or an approved third party, requires the underlying obligations to have a market value of not less than the principal amount disbursed, and directs placement through a primary government securities dealer or a financial institution doing business in Texas.
A structured Treasury portfolio uses securities Texas authorizes directly, U.S. and agency obligations under §2256.009(a)(1), owned by the fund rather than promised by a counterparty, while bond proceeds may not go into the non-money-market mutual funds of §2256.014(b).
Each is a product mGIC evaluates and bids without selling: what it buys is a rate and a schedule struck for the fund rather than a pool average, and what it gives up is the pool's same-day access.
Which way that trade cuts for an issue is the head-to-head on the LGIP vs GIC page; for money already in the pool, the practical test is to compare your pool yield with real bids for the same dollars and schedule.
Using both: the pool for near-term draws, a bid for the rest?
The two are not mutually exclusive: near-term draws can stay in the pool, and the portion with a stated spending horizon can be bid for a term and withdrawal schedule matched to it, the sequencing the draw schedule guide works through.
Texas paperwork is built for per-fund decisions: each investing entity must adopt a written investment policy and a separate written investment strategy for each fund or group of funds, reviewed not less than annually, with the policy emphasizing safety of principal and liquidity under §2256.005, and the overall order running safety, then liquidity, then yield, under §2256.006.
Where a bid is the next step, mGIC acts as Bidding Agent: bid specifications, soliciting qualified providers, managing questions, comparing bids on rate and non-rate terms, then documentation and settlement coordination and the certifications delivered to bond counsel, with a compliance file at the end.
mGIC sells none of the products it evaluates and does not act as principal; its fee is paid by the winning provider, not the issuer, disclosed and at or below the safe-harbor maximum in the Treasury arbitrage regulations.
For a free, no-obligation reinvestment review of a TexPool position or a fund being prepared for bid, start at the contact page.
Which investments an issue may use, and how the arbitrage rules treat them, are determinations for bond counsel and tax counsel.
Frequently asked questions
How much does TexPool charge participants?
Per the pool's site as of October 6, 2026, TexPool's fee is 0.045% annually and TexPool Prime's is 0.055%, calculated daily on each pool's balance and deducted from interest earnings, with quoted rates net of fees. The site says the fees stay fixed for the term of the Federated Hermes management contract.
What can TexPool and TexPool Prime invest in?
TexPool invests only in U.S. Government securities, repurchase agreements collateralized by them and AAA-rated no-load money market funds; TexPool Prime may also hold commercial paper and certificates of deposit. Both pools seek to maintain a $1.00 value per share; the pool's materials state it is possible to lose money by depositing money in the pool.
Does TexPool provide arbitrage rebate reporting?
The pool's FAQ lists bond proceeds among the asset types it invests, next to operating cash and state aid, but the documents reviewed for this page describe no arbitrage or rebate reporting service. A list of asset types is not a statement about yield restriction or rebate treatment, which remain determinations for bond counsel and tax counsel.
Does Texas require a resolution to invest in a public funds investment pool?
Government Code §2256.016(a) requires a rule, order, ordinance or resolution specifically authorizing the particular pool, and §2256.019 requires the pool to stay continuously rated no lower than AAA or AAA-m or an equivalent rating by at least one nationally recognized rating service.
What happens if an investment loses a required minimum rating under Texas law?
Under §2256.021, an investment that loses a minimum rating required under the subchapter stops being authorized while it is unrated, and the entity must take prudent measures to liquidate it. The GIC section requires collateral rather than a provider rating, so the rule operates where a rating is required.
Where does TexPool publish its current rate?
On the pool's own home page, texpool.com. Pool rates change daily, so no page here quotes one. Deposits and withdrawals can be made on any business day, transactions can be scheduled up to 90 business days ahead, and interest accrues daily and is paid monthly.
Sources
This page is general educational information about municipal finance and federal and state rules as of the date shown. It is not legal, tax or investment advice, and it is not a recommendation about any particular investment. Product availability, legality and suitability depend on the issuer, jurisdiction, governing documents and transaction-specific facts. Final legal and tax determinations remain with the issuer's bond counsel, tax counsel and other advisors.
