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Home My WebLink AboutPortfolio Management Summary Investment Report - September 2004w• fr1 o� a City and Redevelopment Agency Portfolios COMPLIANCE.ANALYSIS AND INVESTMENT REPORT September,2004 :...................... Paul S. Gibson, C.C.M.T., Treasurer Thomas W. Jeffrey, J.D., M.B.A., Deputy City Treasurer Treasurer's Commentary The Federal Open Market Committee (FOMC) will meet on 10 November to review short-term interest rates. The Futures Market has assigned an 85% probability to another 25-basis point hike in the Federal Funds Rate, bringing it to 2.00%. This might not be the case, however, if the October monthly payroll data proves to be disappointing, or if the outcome of the presidential election is not apparent on 3 November. If there is a rate hike, then it may be the last one for a while. The FOMC is reportedly less concerned about inflation, and has indicated that any future rate increases are going to be driven by economic data. The FOMC is currently studying inflation trends in order to decide how long a pause it should take after reaching a 2.00% Federal Funds Rate at the November meeting. As an FOMC official recently outlined, there are very clear risks to continued economic growth, such as rising oil prices; weak employment growth; a low household savings rate; cautious business investment; weakening fiscal stimulus; a large trade deficit; and the relative strength of the U.S. Dollar. It is believed that higher oil prices are more likely to act as a drag on economic growth than as a stimulant for inflation. Rising oil prices will cause companies to limit their hiring, and consumers to limit their discretionary spending. A competitive global -economy will serve as a brake on the "pricing power" of U.S. businesses, thereby slowing inflation. Pis 67d,-jo�, C. C.Ir. r. Treasurer PORTFOLIO STATISTICS Dollars in Thousands SEP-04 AUG-04 JUL-04 JUN-04 MAY-04 APR-04 CITY Month -End Book Value*** $ 132,120 $ 136,975 $ 141,451 $ 142,417 $ 125,903 $ 130,340 Month -End Market Value*** $ 132,402 $ 137,301 $ 141,666 $ 142,542 $ 126,048 $ 130,530 Paper Gain (Loss) $ 282 $ 326 $ 215 $ 125 $ 145 $ 190 Prior Year Book Variance $ (6,243) $ (48,234) $ (34,386) $ (35,770) $ (55,318) $ (26,045) Interest Earnings $ 191 $ 195 $ 187 $ 174 $ 159 $ 156 Yield -To -Maturity 1.84% 1.74% 1.68% 1.58% 1.53% 1.54% Weighted Maturity (Days) 123 121 128 133 120 119 Effective Duration 0.18 0.19 0.22 0.23 0.18 0.20 RDA Month -End Book Value *** $ 159,360 $ 161,119 $ 175,310 $ 184,909 $ 179,643 $ 152,696 Month -End Market Value *** $ 159,405 $ 161,209 $ 177,511 $ 187,083 $ 181,819 $ 154,863 Paper Gain (Loss) $ 45 $ 90 $ 2,201 $ 2,174 $ 2,176 $ 2,167 Prior Year Book Variance $ 6,467 $ 37,804 $ 74,759 $ 85,643 $ 77,086 $ 49,309 Interest Earnings $ 199 $ 223 $ 229 $ 183 $ 161 $ 156 Yield -To -Maturity 1.61% 1.51% 1.53% 1.37% 1.17% 1.22% Weighted Maturity (Days) 62 71 134 128 81 96 Effective Duration 0.10 0.12 0.13 0.15 0.02 0.03 *** Omits SLGSs. City of Palm Desert -- Portfolio Characteristics 30 September 2004 Dollars in Thousands Aaeina Interval Market Value General Fund Ageing < 1 M $ 55,605 < 2M 2,381 < 3M 3,009 100 < 6M 10,793 80 < 1YR 6,489 66 < 2YR _ 0 60 - < 3YR 5,967 0 40 _ < 4YR CL 13 < 5YR - 20 g 3 4 � = p > 5YR - 0 , Total: $ 84,244 < 1 M < 2M < 3M < 6M < 1YR < 2YR r Ratinas * Market Value Credit Quality AAA AA AAA $ 31,519 28% 0% Unrated ** 72,785 0% AA 7,029 A 8,408 A rated A-1 6,026 7% Un65% ** Total: $ 125,767 65% Sector Market Value Asset Allocation Money Market Funds $ 22,054 LAIF LAIF 40,000 RDA Loan 32,785 MTNs 17,878 RDA 9 loan U.S. Treasury - Money Market Federal Agency 7,024 Funds Commercial Paper 6,026 20% Total: $ 125,767 MTNs 16% / Month City Yield LAIF Yield Variance Performance Oct03 1.61 1.60 0.01 Nov 1.61 1.57 0.03 1.9 Dec 1.58 1.55 0.03 Jan04 1.58 1.53 0.05 Feb 1.58 1.44 0.14 Mar 1.56 1.47 0.09 d Apr 1.54 1.45 0.09 May 1.53 1.43 0.11 Jun 1.58 1.47 0.11 1.4 Jul 1.68 1.60 0.07 Oct03 Nov DecJan04Feb Mar Apr May Jun Jul Aug Sep Aug 1.74 1.67 0.06 Sep 1.84 1.77 0.07 I ®l Ai F Yield ®City Yield * Moody's Credit Ratings ** LAIF, and City Loan to RDA Page 2 of 8 Par Value I Issuer Medium -Term Notes $ 2,406,000 ABBOTT LABS $ 2,355,000 CHEVRON -TEXACO $ 3,000,000 FORD $ 2,500,000 FORD $ 2,360,000 NORTHERN TRUST $ 1,270,000 PITNEY BOWES $ 1,000,000 WACHOVIA J $ 14,891,000 Subtotal Commercial Paper -- Discount $ 3,025,000 GENERAL ELECTRIC $ 2,425,000 GENERAL ELECTRIC $ 3,031,000 GENERAL ELECTRIC $ 8,481,000 Subtotal Federal Agencies -- Discount 1,015,000 FANNIE MAE _$ $ 3,035,000 FANNIE MAE $ 3,045,000 FANNIE MAE 1 $ 7,095,000 Subtotal LGIP $ 40,000,000 L.A.I.F. $ 40,000,000 Subtotal LGIP $ 11,335,591 C.A.M.P. 1 $ 11,335,591 Subtotal Pooled Funds --AIM $ 10,718,729 PRIME PORTFOLIO 1 $ 10,718,729 Subtotal City Loan to RDA $ 32,785,480 CITY OF PALM DESERT $ 32,785,480 Subtotal Total Investments $ 125,306,800 City of Palm Desert Portfolio Holdings 30 September 2004 Market Ratings Coupon Maturity I Cost YTM Price I Value I Moody's I S & P 6.80 5/15/05 $ 2,475,589 2.08 102.50 $ 2,466,212 Al AA 6.63 10/1/04 $ 2,355,000 1.13 100.00 $ 2,355,000 Aa2 AA 7.20 6/15/07 $ 3,103,434 5.75 108.03 $ 3,240,939 A3 BBB - 7.20 6/15/07 $ 2,586,195 5.75 108.03 $ 2,700,782 A3 BBB - 6.65 11/9/04 $ 2,373,551 1.17 100.45 $ 2,370,542 Aa3 AA- 5.95 2/1/05 $ 1,289,392 1.32 101.02 $ 1,282,968 Aa3 AA 7.70 2/15/05 $ 1,023,273 1.38 102.01 $ 1,020,056 Aa3 A $ 15,206,433 2.81 $ 15,436,500 1.55 12/15/04 $ 2,999,603 1.61 99.59 $ 3,012,611 P-1 A-1+ 4.25 1/28/05 $ 2,447,993 1.30 100.69 $ 2,441,849 P-1 A-1+ 1.64 1/14/05 $ 2,999,932 1.70 99.41 $ 3,013,062 P-1 A-1+ $ 8,447,528 1.66 $ 8,467,521 1.92 5/2/05 $ 997,021 2.00 98.73 $ 1,002,109 Aaa AAA 1.71 3/3/05 $ 2,995,644 1.78 99.14 $ 3,008,899 Aaa AAA 1.79 4/1105 $ 2,999,427 1.86 98.96 $ 3,013,332 Aaa AAA $ 6,992,092 1.85 $ 7,024,341 0.00 10/1/04 $ 40,000,000 1.77 100.00 $ 40,000,000 $ 40,000,000 1.77 $ 40,000,000 0.00 10/1/04 $ 11,335,591 1.47 100.00 $ 11,335,591 $ 11,335,591 1.47 $ 11,335,591 0.00 10/1/04 $ 10,718,729 1.22 100.00 $ 10,718,729 $ 10,718,729 1.22 $ 10,718,729 0.00 10/1/04 $ 32,785,480 1.77 100.00 $ 32,785,480 $ 32,785,480 1.77 $ 32,785,480 $ 125,485,852 1.84 $ 125,768,161 U U U AAA Aaa AAA U U "U" = Unrated Page 3 of 8 City of Palm Desert Portfolio Holdings 30 September 2004 Market Ratings Par Value Issuer Coupon Maturity Cost YTM I Price ' Value I Moody's I S & P Cash $ 5,962,653 CITY MAIN CHKG 0.00 10/1/04 $ 5,962,653 0.00 100.00 $ 5,962,653 N/A N/A $ 324,463 DESERT WILLOW CHKG 0.00 10/1/04 $ 324,463 0.00 100.00 $ 324,463 N/A N/A $ 22,920 OFFICE COMPLEX TRUST 0.00 10/1/04 $ 22,920 0.00 100.00 $ 22,920 N/A N/A $ 323,896 RECREATIONAL FAC CHKG 0.00 10/1/04 $ 323,896 0.00 100.00 $ 323,896 N/A N/A $ 6,633,931 Subtotal $ 6,633,931 $ 6,633,931 Total Investment and Cash $ 131,940,731 $ 132,119,783 $ 132,402,092 "U" = Unrated Page 4 of 8 Palm Desert Redevelopment Agency -- Portfolio Characteristics 30 September 2004 Dollars in Thousands Aaeina Interval Market Value < 1 M $ 76,873 < 2M - <3M - < 6M 11,016 < 1YR < 2YR - < 3YR - < 4YR - < 5YR - > 5YR - Total: $ 87,889 Quality * Market Value AAA $ 90,327 Unrated ** 61,262 AA - A - A-1 5,021 Total: $ 156,610 Sector Market Value U.S. Treasury $ 23,064 Money Market Funds 59,252 LAIF 61,262 Federal Agency 8,011 Commercial Paper 5,021 Corporate Bonds - Total: $ 156,610 Month RDA Yield LAIF Yield Variance Oct03 1.30 1.60 -0.30 Nov 1.29 1.57 -0.28 Dec 1.29 1.55 -0.25 Jan04 1.24 1.53 -0.29 Feb 1.20 1.44 -0.24 Mar 1.20 1.47 -0.28 Apr 1.22 1.45 -0.23 May 1.17 1.43 -0.26 Jun 1.37 1.47 -0.10 Jul 1.63 1.60 -0.08 Aug 1.51 1.67 -0,16 Sep 1.61 1.77 -0.17 Moody's Credit Ratings "* LAIF ......... _ ................. .. Portfolio Ageing w/o SLGSsM 100 8 90 7 80 70 c 60 0 50 40 a° 30 20 13 10 0 0 0 n 0 0 0 0 < 1 M < 2M < 3M < 6M < 1YR < 2YR < 3YR < 4YR (Credit Quality AAA AA 58% 0% A 0% A-1 Unrated 3% 39% Asset Allocation Money Market Funds 41% U.S. Treasury 16% LAIF 43% Performance 1.7 - r 1.4 - L L I 1.1 Oct03 Nov Dec Jan04Feb Mar Apr May Jun Jul Aug Sep ®LAIFYield MRDAYield s Page 5 of 8 Palm Desert Redevelopment Agency Portfolio Holdings 30 September 2004 Par Value I Issuer Coupo Commercial Paper -- Discount $ 2,009,000 GENERAL ELECTRIC 1.35 $ 3,039,000 GENERAL ELECTRIC 1.73 $ 5,048,000 Subtotal U.S. Treasury -- Coupon $ 23,107,000 UNITED STATES TREASURY 1.63 $ 23,107,000 Subtotal Federal Agency -- Coupon $ 1,983,000 FED HOME LOAN MORTGAGE 1.88 $ 1,983,000 Subtotal Federal Agency -- Discount $ 3,040,000 FED NATIONAL MTG ASSOC 1.75 $ 3,040,000 FED NATIONAL MTG ASSOC 1.71 $ 6,080,000 Subtotal LGIPs $ 40,000,000 L.A.I.F. 0.00 $ 5,971,845 L.A.I.F. (HOUSING) 0.00 $ 5,470,540 L.A.I.F. BOND PROCEEDS 0.00 $ 9,820,019 L.A.I.F. BOND PROCEEDS 0.00 $ 61,262,404 Subtotal LGIP $ 20,938,942 C.A.M.P. 0.00 $ 20,938,942 Subtotal Pooled Funds -- AIM $ 38,313,785 PRIME PORTFOLIO 0.00 $ 38,313,785 Subtotal Total Investments $ 156,733,131 Cash $ 2,470,597 HOUSING AUTH CHKG 0.00 $ 324,329 HOUSING AUTH TRUST 0.00 $ 2,794,926 Subtotal n I Maturity I Market Cost YTM Price I Value 10/4/04 $ 1,999,733 1.38 99.98 $ 2,008,609 3/1105 $ 2,999,569 1.80 99.11 $ 3,012,054 $ 4,999,302 1.63 $ 5,020,664 3/31/05 $ 23,065,480 1.86 99.81 $ 23,063,674 $ 23,065,480 1.86 $ 23,063,674 1/15/05 $ 1,985,102 1.70 100.00 $ 1,983,000 $ 1,9851102 1.70 $ 1,983,000 3/4/05 $ 2,999,509 1.82 99.14 $ 3,013,856 3/1/05 $ 3,001,012 1.78 99.15 $ 3,014,160 $ 6,000,521 1.80 $ 6,028,016 10/1/04 $ 40,000,000 1.77 100.00 $ 40,000,000 10/1/04 $ 5,971,845 1.77 100.00 $ 5,971,845 10/1/04 $ 5,470,540 1.77 100.00 $ 5,470,540 10/1/04 $ 9,820,019 1.77 100.00 $ 9,820,019 $ 61,262,404 1.77 $ 61,262,404 10/1/04 $ 20,938,942 1.47 100.00 $ 20,938,942 $ 20,938,942 1.47 $ 20,938,942 10/1/04 $ 38,313,785 1.22 100.00 $ 38,313,785 $ 38,313,785 1.22 $ 38,313,785 $ 156,565,536 1.61 $ 156,610,485 10/1/04 $ 2,470,597 0.00 100.00 $ 2,470,597 10/1/04 $ 324,329 0.00 100.00 $ 324,329 $ 2,794,926 $ 2,794,926 Ratings I Moody's I S & P P-1 A-1+ P-1 A-1+ Aaa AAA 7 Aaa AAA Aaa AAA Aaa AAA U U U U U U U U U AAA Aaa AAA N/A N/A N/A N/A U = Unrated Page 6 of 8 f Par Value I Issuer Total Investments and Cash $ 159,528,057 Palm Desert Redevelopment Agency Portfolio Holdings 30 September 2004 I Coupon I Maturity I Cost $ 159,360,462 Market I YTM Price I Value $ 159,405,411 Ratings Moody's I S & P U = Unrated Page 7 of 8 a STATEMENT OF COMPLIANCE The investment portfolios of the City of Palm Desert ("City") and the Palm Desert Redevelopment Agency ("RDA') are governed by federal, state, and local law. The City Treasurer's "Statement of Investment Policy" is more restrictive than the California Government Code. The Palm Desert Investment Committee and the Palm Desert City Council review the Statement of Investment Policy annually. For the month ended 30 September 2004, the City and the RDA investment portfolios were in compliance with all applicable federal, state, and local laws and regulations. The City Treasury continued to pursue conservative and prudent investment strategies, based upon the stated objectives of safety, liquidity, and yield (in order of priority). Barring unforeseen events, the City Treasury should have sufficient cash to finance the operations of the City of Palm Desert and the Palm Desert Redevelopment Agency over the next six months. In addition, portions of either the City or the RDA portfolio could be liquidated in order to meet any significant, unexpected cash requirements. Bloomberg L.P. and Interactive Data Corporation provided the data and the analytical tools that were used to calculate the market value of all securities in the City and the RDA investment portfolios. State and Local Government Series securities are held in escrow accounts and are therefore not included in this report as assets. All balances are bank balances. Respectfully submitted on 27 October 2004, f aabS GGlraory C, C.M. T. City Treasurer SUMMARY OF AUTHORIZED INVESTMENTS I California Government Code I City Investment Policy CA Govt Maximum Maximum Quality Maximum Maximum Quality % of City % of RDA Code Investment Category Maturity Limit S&P/Mdys Maturity Limit S&P/Mdys Portfolio Portfolio 53601(a) Palm Desert Bonds 5 Years No Limit Not Authorized (1) 53601(b) U.S. Treasuries, , 5 Years No Limit 5 Years No Limit I 0.0% 14.7% 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 30% 5.6% 5.1 % 53601(f) Bankers's,Acceptance's` 180 Days 40% 180 Days 40% A-1 & P-1 - - 53601(g) Commercial Paper' - 270 Days 25% A-1+ or P-1 270 Days 25% A-1+ or P-1 4.8% 3.2% 53601(h) Negotiable �db—i ` 5 Years 30% 5 Years 30% AA- or Aa3 - - 53601(1) Repos' 1 Year No Limit 30 Days 20% AAA & Aaa - - 53601(i) Reverse Repos 92 Days 20% Not Authorized 536010) Medium-Term'Ngtes 5Years 300% A 5Years 3°0% A 14.1°% 0.0% 53601(k) Mutual Funds __' 90 Days 20 /° AAA & Aaa 90 Days 20 /° (2) AAA & Aaa 8.5 /° 24.5 /° 53601(I) Trust Indenture Debt Not Authorized 53601(m) Secured Bank Deposits 5 Years No Limit Not Authorized 53601(k) I Local Goverrimed- AAA & Aaa f AAA & Aaal Investment Pools 90 Days 20% or Advisor 90 Days 20% 2 O I or Advisor 9.0% I 13.4% 53601(n) I Mortgage -Backed 5 Years 20% A (issuer) & Not Authorized Securities AA (Security) LAIF "_ _. j. No Limit I No Limit (1) The City loan to RDA, which is not a bond, has been approved by`the Palm Desert City Council. (2) Maximum limit for mutual funds and local government investment pools, excluding bond proceeds. 31.9% 1 39.1% 73.9% 100.0% * Certified California Municipal Treasurer Page 8 of 8