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HomeMy WebLinkAboutInvestment Report - June 2015M•N•N� City oqo� rnm��� of ECONOMIC COMMENTARY The Federal Open Market Committee (FOMC) met on June 16-17, and opted to leave short-term interest rates unchanged. The FOMC also downgraded its outlook for 2015 U.S. economic growth from 2.3-2.7% to 1.8-2.0%. Federal funds futures have assigned a 12% probability to a rate increase in September, and a 49% probability to one in December. The International Monetary Fund ("IMF") has recommended that the U.S. delay raising interest rates due to the "unsettled global situation" -- namely, Greece and China. The Greek crisis escalated on June 29 when the Greek Government closed all banks, and imposed capital controls. On June 30, Greece defaulted on a $1.73 billion payment to the IMF. On July 5, 60% of the Greek electorate voted "No" on a referendum on whether Greece should comply with austerity proposals from the European Central Bank, the EU, and the IMF. Faced with a collapsing economy and a possible exit from the Eurozone, the Greek Government eventually capitulated to European demands, and adopted harsher austerity measures. In June -July, the Chinese stock market fell by 30%, wiping out nearly $3 trillion in three weeks. The Chinese Government reacted by suspending intial public offerings; arresting short -sellers; and encouraging insider buying. Trading in over 90% of the 2,774 stock shares listed on Chinese exchanges was suspended. China is in the midst of a "triple bubble," with the third -largest credit bubble of all time; the largest investment bubble; and the second-largest real estate bubble. Y6rCd . ViAji C' CL M.Y. City Treasurer Certified California Municipal Treasurer PORTFOLIO STATISTICS Thousands of Dollars �L--D 2015 Cli e ii marKets i eam City Treasurer Paul S. Gibson, C.C.M.T. Deputy City Treasurer Thomas Metz, J.D., M.B.A. Investment umectives The treasurer shall invest all public monies in a manner that ensures safety of principal; sufficient liquidity to finance the City's expenditures; and the highest yield possible after the previous two objectives have been met. Month -End Book Value $ 202,795 $ 202,346 $ 197,164 $ 195,497 $ 201,332 $ 202,484 Month -End Market Value $ 202,795 $ 202,345 $ 197,164 $ 195,497 $ 201,358 $ 202,508 Paper Gain (Loss) $ - $ (1) $ - $ - $ 26 $ 24 Prior Year Book Variance $ (23,697) $ (22,508) $ (21,335) $ (21,888) $ (18,833) $ (10,826) Interest Earnings (W/O Cash; $ 54 $ 64 $ 58 $ 65 $ 64 $ 68 Yield -To -Maturity 0.35% 0.40% 0.39% 0.41 % 0.43% 0.42% Weighted Maturity (Days) 10 75 69 70 104 105 Effective Duration 0.02 0.12 0.10 0.10 0.13 0.14 All data as of June 30, 2015 Dollars in Thousands Maturities Market Value < 1 M $ 161,584 < 2M - < 3M < 6M - < 1Y 6,479 < 2Y - < 3Y - < 4Y - < 5Y - Total: $ 168,063 Ratings Market Value AAA or Aaa $ 86,523 A 6,480 Unrated 97,716 Total: $ 190,719 Assets Market Value County Pool 77,876 LAIF 49,999 WF/LAIF Bond Proceeds 25,061 City Loan to RDA 22,655 Commercial Paper 6,480 CAMP 4,842 WF Heritage MMF 3,806 Total: $ 190,719 Month City Yield LAIF Yield Ju114 0.31 0.24 Aug 0.32 0.26 Sep 0.41 0.25 Oct 0.42 0.26 Nov 0.43 0.26 Dec 0.42 0.27 Jan15 0.42 0.26 Feb 0.43 0.27 Mar 0.41 0.28 April 0.39 0.28 May 0.40 0.29 Jun 0.35 0.29 PORTFOLIO CHARACTERISTICS June 2015 Maturities Distribution 96 100 80 0 0 60 0 r 40 0 a 20 0 0 0 0 4 0 0 0 0 1M <2M <3M <6M <1Y <2Y <3Y <4Y <? Credit QualityAAA or Aaa 51% A 4% Unrated 51% WACI M11U%,0L1V1I I County Pool 41% Variance Performance 0.07 0.06 ^ 0.16 0.15 0.17 0.15 0.15 0.16 0.13 0.10 0.11 0.06 WF/LAIF Bond Proceeds 13% 14vatyLoan to WF Heritage Commercial RDA MMF CAMP Paper 12% CITY OF PALM DESERT TREASURER'S OFFICE PAGE 2 OF 3 STATEMENT OF COMPLIANCE June 2015 The investment of the City of Palm Desert securities portfolio is governed by California Government Code Section 53601 and by the Palm Desert Statement of Investment Policy. The City investment policy is more conservative than State law. The Palm Desert Audit, Finance, and Investment Committee, and the Palm Desert City Council review the City investment policy annually. For the month ended June 30, 2015, the City investment portfolio was in compliance with all applicable state and local laws and regulations. The City Treasurer's Office continued to pursue conservative and prudent investment strategies, based upon the stated objectives of safety, liquidity, and yield. Barring unforeseen events, the City Treasury should have sufficient cash to finance City expenditures for the next six months. In addition, portions of the City investment portfolio could be liquidated in order to meet any significant, unexpected cash requirements. Union Bank Custody Services provided market value prices for securities in the City investment portfolio. All balances are bank balances. Respectfully submitted, .raafs okew, ee.M.Y. City Treasurer SUMMARY OF AUTHORIZED INVESTMENTS California Government Code City Investment Policy CA Govt Maximum Maximum Minimum Maximum Maximum Minimum % of City Code Investment Category Maturity Limit Quality Maturity Limit Quality Portfolio 53601(a) Palm Desert Bonds 5 Years No Limit - 53633 Demand Deposits No Limit No Limit No Limit No Limit - 53601(b) U.S. Treasuries 5 Years No Limit 5 Years No Limit - 53601(c) CA State Debt 5 Years No Limit Not Authorized 53601(d) CA Local Agency Debt 5 Years No Limit Not Authorized 53601(e) Federal Agencies 5 Years No Limit 5 Years No Limit - 53601(f) Bankers's Acceptances 180 Days 40% 180 Days 40% A-1 or P-1 - 53601(g) Commercial Paper 270 Days 25% A-1/P-1 270 Days 25% A-1 or P-1 3.4% 53601(h) Negotiable CDs 5 Years 30% 5 Years 30% AA- or Aa3 - 53601(i) Repos 1 Year No Limit 30 Days 20% 1 - 53601(I) Reverse Repos 92 Days 20% Not Authorized 53601(j) Medium -Term Notes 5 Years 30% A 5 Years 30% A - 53601(k) Money Market Funds 90 Days 20% AAA & Aaa 90 Days 20% AAA & Aaa 2.0% 53601(I) Trust Indenture Debt Not Authorized 53601(m) Secured Bank Deposits 5 Years No Limit Not Authorized 53601(k) Local Government Investment Pools 90 Days No Limit AAA & Aaa or Advisor 90 Days 50% (1) AAA & Aaa 1 or Advisor 43.4% 53601(n) Mortgage -Backed Securities 5 Years 20% A (Issuer) & AA (Security) Not Authorized 16429.1(b) L.A.I.F. No Limit $50MM/Acct No Limit $50MM/Acct 39.4% (2)1 88.2% Footnotes: (1) Maximum concentration limit for local agency investment pools, excluding bond proceeds. (2) Total does not include cash, and City Loan to RDA. CITY OF PALM DESERT TREASURER'S OFFICE PAGE 3 OF 3 CITY PORTFOLIO CONCENTRATION LIMITS June 2015 Investments RIVERSIDE COUNTY TREASURER LOCAL AGENCY INVESTMENT FUND WF/L.A.I.F. BOND PROCEEDS COMMERCIAL PAPER -- DISCOUNT WF ADVANTAGE HERITAGE MMF CALIFORNIA ASSET MANAGEMENT PROGRAM TOTAL BEFORE CASH PLUS: CASH GRAND TOTAL % of Book Value Portfolio $ 77,875,943.68 43.23% 49,999,499.36 27.76% 25,061,271.13 13.91 % 6,480,572.22 3.60% 3,805,446.06 2.11 % 4,842,326.33 2.69% $ 168,065,058.78 93.30% $ 12,075,060.09 6.70% $ 180,140,118.87 (1) 100.00% FOOTNOTE: (1) In the City of Palm Desert Comprehensive Annual Financial Report ("CAFR"), both the City of Palm Desert ("City") and the City's external auditor define total investments as demand deposits, investments in various instruments, and investments held in local government investment pools. The concentration percentages shown above were calculated based on that definition. r4-0 It a W d Z' W d E an r CD � N Q � cn O M a •° c a� O = O o27 p a. 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