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Home My WebLink AboutInvestment Report - JUN 06�C City of Palm Desert4* 40 City and Redevelopment Agency Portfolios COMPLIANCE ANALYSIS AND INVESTMENT REPORT June 2006 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) met on June 29, and raised the Federal Funds Rate by 25 basis points to 5.25 percent. This was the 17th increase in 17 meetings. The FOMC indicated that although economic growth was slowing due to a cooling of the housing market and the lagged effects of interest -rate and energy price hikes, high energy prices had the potential to support inflationary pressures. Going forward, FOMC monetary policy will be dependent upon economic data. Currently, there is significant disagreement among the Committee as to the future course of interest rate policy. The futures market has assigned a 50/50 probability that the FOMC will raise short-term interest rates again on August 8. During June, the yield curve flattened, and became more inverted, with short-term maturities yielding more than longer -term maturities. Bond prices fell for nine consecutive days in June -- the longest losing streak in over 30 years. Prices then recovered substantially following the end of the FOMC meeting, as investors interpreted the FOMC's statement as indicating that it may be nearing the end of the tightening cycle. Forecasters are predicting that core inflation will increase in coming months, with a visible economic slowdown occurring in 2007. One harbinger of this is the large number of new condos that are being converted to rental properties. Gross Domestic Product growth is expected to slow to 2.8 percent in 2007 -- the sixth year of the economy's expansion. Pa"bS. 47dwr, C. C. ". r Treasurer PORTFOLIO STATISTICS Dollars in Thousands JUN-06 MAY-06 APR-06 MAR-06 FEB-06 JAN-06 CITY Month -End Book Value'"" $ 173,272 $ 179,707 $ 150,753 $ 149,944 $ 147,007 $ 147,649 Month -End Market Value'"' $ 172,365 $ 178,862 $ 149,906 $ 149,118 $ 146,312 $ 146,991 Paper Gain (Loss) $ (907) $ (845) $ (847) $ (826) $ (695) $ (658) Prior Year Book Variance $ 23,199 $ 7,292 $ 4,436 $ 3,087 $ 4,320 $ 7,431 Interest Earnings $ 596 $ 531 $ 506 $ 513 $ 476 $ 454 Yield -To -Maturity 4.72% 4.62% 4.47% 4.38% 4.31% 4.06% Weighted Maturity (Days) 354 418 419 415 414 210 Effective Duration 0.54 0.67 0.71 0.73 0.76 0.27 RDA Month -End Book Value "'" $ 144,460 $ 137,456 $ 142,678 $ 149,459 $ 153,652 $ 151,779 Month -End Market Value ""' $ 143,611 $ 136,700 $ 142,043 $ 148,888 $ 153,233 $ 151,479 Paper Gain (Loss) $ (849) $ (756) $ (635) $ (571) $ (419) $ (300) Prior Year Book Variance $ (1,973) $ 13,083 $ 17,442 $ (8,865) $ (5,453) $ (8,781) Interest Earnings $ 552 $ 537 $ 522 $ 553 $ 494 $ 435 Yield -To -Maturity 4.69% 4.62% 4.50% 4.38% 4.26% 3.99% Weighted Maturity (Days) 424 445 429 410 415 128 Effective Duration 0.78 0.86 0.86 0.86 0.86 0.15 "" Omits SLGSs. Dollars in Thousands Asaeinsa Interval < 1M < 2M < 3M < 6M < 1 YR < 2YR < 3YR < 4YR < 5YR > 5YR Total: Ratings AAA AA A Unrated " 8+ Total: City of Palm Desert -- Portfolio Characteristics 30 June 2006 Market Value $ 102,893 2,986 1,981 11,330 8,806 12,740 12,805 $ 153,541 Market Value $ 84,296 $ 2,071 $ 5,973 60,510 10,037 $ 162,887 General Fund Ageing) i 100 ---- - -- - ------ - - - - ---- - - - - - 80 67 c 60 I t 40 0 a 20 7 6 8 2 0 1 0 -- - - - n----II- -n-- \ < 1 M < 2M < 3M < 6M < 1YR < 2YR < 3YR Credit Qualityl AAA f ° 0410 g+ 6% Unrateu 37% AA 1% A 4% Sector Market Value Asset Allocation) LAIF 1 RDA Loan MMFs $ 43,731 17% 20% LAIF 27,724 RDA Loan 32,785 MTNs MTNs 21,980 13% Agencies 36,667 M M Fs ° 27 /° CP _ Total: $ 162,887 Agencies 23% Month Citv Yield LAIF Yield Ju105 3.37 3.08 Aug 3.43 3.18 Sep 3.56 3.32 Oct 3.67 3.46 Nov 3.81 3.64 Dec 3.95 3.81 Jan06 4.06 3.96 Feb 4.31 4.04 Mar 4.38 4.14 Apr 4.47 4.30 May 4.62 4.56 Jun 4.72 4.70 ' Standard and Poors LAIF, and City Loan to RDA Variance 0.29 0.25 0.24 0.21 0.17 0.14 0.10 0.27 0.23 0.17 0.05 0.02 Performance 4.8 ------------ - ---- -- ----- 4.3 7 3.8 a� 3.3 2.8 Ju105 Aug Sep Oct Nov Dec Jan06 Feb Mar Apr May Jun M , . , . Page 2 of 8 City of Palm Desert Portfolio Holdings 30 June 2006 Market Ratings Par Value Issuer I Coupon] Maturity I Cost I YTM I Price I Value Moody'sl S&P Medium -Term Notes $ 3,000,000 BANK ONE 4.13 9/1/07 $ 3,016,009 3.64 98.11 $ 2,943,183 Aa3 A+ $ 3,000,000 FORD MOTOR CREDIT CORP 7.20 6/15/07 $ 3,036,531 5.75 99.26 $ 2,977,890 Bat B+ $ 2,500,000 FORD MOTOR CREDIT CORP 7.20 6/15/07 $ 2,530,442 5.75 99.26 $ 2,481,575 Ba2 B+ $ 4,612,000 FORD MOTOR CREDIT CORP 7.20 6/15/07 $ 4,697,957 5.10 99.26 $ 4,578,010 Ba2 B+ $ 2,000,000 GENERAL ELECTRIC 3.13 11/9/06 $ 1,994,529 3.92 99.15 $ 1,983,062 Aaa AAA $ 2,000,000 GENERAL ELECTRIC 3.60 10/15/08 $ 1,941,037 4.99 95.73 $ 1,914,596 Aaa AAA $ 3,000,000 GOLDMAN SACHS 7.20 3/1/07 $ 3,070,703 3.50 101.01 $ 3,030,171 Aa3 A+ $ 2,000,000 WAL-MART 6.88 8/10/09 $ 2,109,822 4.93 103.56 $ 2,071,112 Aa2 AA $ 22,112,000 Subtotal $ 22,397,031 4.72 $ 21,979,599 Federal Agencies -- Coupon $ 3,000,000 FED HOME LOAN BANK 3.70 8/15/07 $ 2,997,035 3.79 98.06 $ 2,941,875 Aaa AAA $ 1,500,000 FED HOME LOAN BANK 2.10 10/13/06 $ 1,493,047 3.79 99.09 $ 1,486,406 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 4.38 9/11/09 $ 2,956,802 5.59 96.97 $ 2,909,063 Aaa AAA $ 1,980,000 FED HOME LOAN BANK 4.75 12/12/08 $ 1,973,936 4.87 98.44 $ 1,949,063 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 4.63 9/12/08 $ 2,985,061 5.40 98.28 $ 2,948,438 Aaa AAA $ 2,049,000 FED HOME LOAN BANK 4.00 12/15/09 $ 1,993,577 4.87 95.47 $ 1,956,155 Aaa AAA $ 2,035,000 FED HOME LOAN MTG CORP 2.50 12/4/06 $ 2,023,822 3.84 98.78 $ 2,010,198 Aaa AAA $ 2,033,000 FED HOME LOAN MTG CORP 4.25 7/15/09 $ 1,998,119 4.87 96.72 $ 1,966,292 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 4.13 11/18/09 $ 1,953,772 4.88 95.95 $ 1,919,008 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 4.90 11/3/08 $ 1,993,055 5.06 98.44 $ 1,968,762 Aaa AAA $ 2,786,000 FED NATIONAL MTG ASSOC 7.13 3/15107 $ 2,853,408 3.55 101.06 $ 2,815,601 Aaa AAA $ 3,000,000 FED NATIONAL MTG ASSOC 3.00 8/15/07 $ 2,980,223 3.63 97.31 $ 2,919,375 Aaa AAA $ 3,000,000 FED NATIONAL MTG ASSOC 2.75 8/11106 $ 2,996,552 3.81 99.72 $ 2,991,563 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 4.63 10/28/09 $ 1,984,528 4.88 97.50 $ 1,950,000 Aaa AAA $ 33,383,000 Subtotal $ 33,182,936 4.46 $ 32,731,798 Federal Agencies -- Callable $ 2,000,000 FED HOME LOAN BANK 4.20 7/18/08 $ 1,974,088 4.88 97.59 $ 1,951,875 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 5.05 8/22/08 $ 1,999,465 5.06 99.17 $ 1,983,434 Aaa AAA $ 4,000,000 Subtotal $ 3,973,552 4.97 $ 3,935,309 Local Government Investment Pool $ 27,724,344 L.A.I.F. 0.00 7/1/06 $ 27,724,344 4.70 100.00 $ 27,724,344 U U $ 27,724,344 Subtotal $ 27,724,344 4.70 $ 27,724,344 Local Government Investment Pool $ 35,730,858 C.A.M.P. $ 35,730,858 Subtotal 0.00 7/1/06 $ 35,730,858 4.95 100.00 $ 35,730,858 U AAA $ 35,730,858 4.95 $ 35,730,858 1 "U" = Unrated Page 3 of 8 City of Palm Desert Portfolio Holdings 30 June 2006 Market Ratings Par Value Issuer ICoupon)Maturity I Cost IYTM Price I Value 'Moody'sl S&P Money Market Fund $ 7,999,937 WF ADVANTAGE GOVT MMF 0.00 7/1/06 $ 7,999,937 4.84 100.00 $ 7,999,937 Aaa AAA $ 7,999,937 Subtotal $ 7,999,937 4.84 $ 7,999,937 City Loan to RDA $ 32,785,480 CITY OF PALM DESERT 0.00 7/1/06 $ 32,785,480 4.70 100.00 $ 32,785,480 U U $ 32,785,480 Subtotal $ 32,785,480 4.70 $ 32,785,480 Total Investments $ 163,735,619 $ 163,794,139 4.72 $ 162,887,325 Cash $ 8,114,326 CITY MAIN CHKG 0.00 7/1106 $ 8,114,326 0.00 100.00 $ 8,114,326 U U $ 610,471 DESERT WILLOW CHKG 0.00 7/1/06 $ 610,471 0.00 100.00 $ 610,471 U U $ 626,688 MONTEREY 170 CHKG 0.00 7/1/06 $ 626,688 0.00 100.00 $ 626,688 U U $ 126,010 RECREATIONAL FAC CHKG 0.00 7/1/06 $ 126,010 0.00 100.00 $ 126,010 U U $ 9,477,494 Subtotal $ 9,477,494 $ 9,477,494 Total Investments and Cash $ 173,213,114 $ 173,271,633 $ 172,364,819 Corporate Issuers FORD MOTOR CREDIT CORP GENERAL ELECTRIC CAPITAL CORP GOLDMAN SACHS BANK ONE WAL-MART % of Portfolio (Market Value) 5.82% 2.26% 1.76% 1.71 % 1.20% "U" = Unrated Page 4 of 8 Dollars in Thousands Aaleina Interval < 1M < 2M < 3M < 6M < 1YR < 2YR < 3YR < 4YR < 5YR > 5YR Total: Quality AAA AA A Unrated " g+ Total: Sector LAIF MMFs Agencies MTNs CID Treasuries Total: Month Ju105 Aug Sep Oct Nov Dec Jan06 Feb Mar Apr May Jun Palm Desert Redevelopment Agency -- Portfolio Characteristics 30 June 2006 Market Value $ 54,449 5,920 8,920 5,830 21,492 18,489 $ 115,100 Market Value $ 85,738 1,934 2,011 49,785 2,995 $ 142,463 Market Value $ 49,785 32,118 53,620 6,940 $ 142,463 Portfolio Ageing w/o SLGSsI 100 - -- --- - - ---- -- - - - - - - 90 80 0 70 0 60 47 0 50 40 a 20 19 16 10 0 5 0 8 5 0 - - ---�--- < 1 M < 2M < 3M < 6M < 1 YR < 2YR < 3YR < 4YR Credit Qualityl r� Asset Allocation AAA 61% 2% LAIF 35% MTN 5% AA 1% A 1% gated " 35% MMFs 3% %gencies 37% RDA Yield LAIF Yield Variance Performance 3.21 3.08 0.13 3.32 3.18 0.14 4.8 -----_-,-- - 3.42 3.32 0.10 3.54 3.46 0.08 4.3 3.68 3.64 0.04 3.82 3.81 0.01 v 3.8 m 3.99 3.96 0.03 } 3.3 4.26 4.04 0.22 4.38 4.14 0.24 2.8 4.50 4.30 0.20 Ju105 Aug Sep Oct Nov DecJan06 Feb Mar Apr May Jun 4.60 4.56 0.04 4.69 4.70 -0.01 ■ LAIF Yield ■ RDA Yield ' Standard and Poors LAIF Page 5 of 8 Palm Desert Redevelopment Agency Portfolio Holdings 30 June 2006 Market Ratings Par Value Issuer I Coupon I Maturity) Cost I YTM I Price I Value Moody's I S&P Medium -Term Notes $ 3,000,000 FORD MOTOR CREDIT CORP 6.50 1/25/07 $ 3,026,356 4.85 99.83 $ 2,994,807 Ba2 B+ $ 2,000,000 FIRST UNION NAT BANK 5.80 12/1/08 $ 2,035,516 5.00 100.57 $ 2,011,426 Aa3 A+ $ 2,000,000 WELLS FARGO BANK 4.00 8/15/08 $ 1,962,095 4.96 96.69 $ 1,933,816 Aal AA- $ 7,000,000 Subtotal $ 7,023,967 4.93 $ 6,940,049 Federal Agency -- Coupon $ 3,000,000 FED FARM CREDIT BANK 2.63 9/17/07 $ 2,971,898 3.43 96.72 $ 2,901,563 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 6.45 10/7109 $ 2,092,725 4.88 103.00 $ 2,060,010 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 3.63 10/24/08 $ 1,945,857 4.89 96.09 $ 1,921,875 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 4.75 8/3/09 $ 1,993,231 4.87 98.25 $ 1,965,000 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 3.38 9/14/07 $ 2,996,683 3.82 97.63 $ 2,928,750 Aaa AAA $ 3,970,000 FED HOME LOAN BANK 4.25 9/12/08 $ 3,920,263 4.79 97.53 $ 3,871,991 Aaa AAA $ 3,970,000 FED HOME LOAN BANK 4.25 9/12/08 $ 3,920,263 4.79 97.53 $ 3,871,991 Aaa AAA $ 4,500,000 FED HOME LOAN BANK 4.38 9/11/09 $ 4,435,202 5.59 96.97 $ 4,363,594 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 3.50 11/3/09 $ 1,916,584 4.88 94.13 $ 1,882,500 Aaa AAA $ 4,000,000 FED HOME LOAN BANK 4.63 9/12/08 $ 3,980,081 4.84 98.28 $ 3,931.250 Aaa AAA $ 2,005,000 FED HOME LOAN BANK 3.88 7124/09 $ 1,948,292 4.89 95.53 $ 1,915,402 Aaa AAA $ 3,000,000 FED HOME LOAN MTG CORP 4.88 3/15/07 $ 3,030,227 3.38 99.53 $ 2,985,938 Aaa AAA $ 2,974,000 FED HOME LOAN MTG CORP 3.63 9/15/06 $ 2,974,181 3.60 99.63 $ 2,962,848 Aaa AAA $ 2,974,000 FED HOME LOAN MTG CORP 3.63 9/15/06 $ 2,974,214 3.60 99.63 $ 2,962,848 Aaa AAA $ 2,049,000 FED HOME LOAN MTG CORP 4.00 12/15/09 $ 1,993,386 4.87 95.47 $ 1,956,155 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 5.00 7/23/08 $ 1,997,380 5.07 99.04 $ 1,980,742 Aaa AAA $ 2,973,000 FED NATIONAL MTG ASSOC 3.63 3/15/07 $ 2,974,468 3.95 98.69 $ 2,933,979 Aaa AAA $ 4,155,000 FED NATIONAL MTG ASSOC 6.63 9/15/09 $ 4,364,174 4.89 103.38 $ 4,295,231 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 3.88 11/17/08 $ 1,956,129 4.87 96.41 $ 1,928,125 Aaa AAA $ 54,570,000 Subtotal $ 54,385,238 4.52 $ 53,619,789 Local Government Investment Pools $ 30,072,381 L.A.I.F. 0.00 7/1/06 $ 30,072,381 4.70 100.00 $ 30,072,381 U U $ 5,460,895 L.A.I.F. (HOUSING) 0.00 7/1/06 $ 5,460,895 4.70 100.00 $ 5,460,895 U U $ 337,964 L.A.I.F. BOND PROCEEDS 0.00 7/1/06 $ 337,964 4.70 100.00 $ 337,964 U U $ 13,913,883 L.A.I.F. BOND PROCEEDS 0.00 7/1/06 $ 13,913,883 4.70 100.00 $ 13,913,883 U U $ 49,785,123 Subtotal $ 49,785,123 4.70 $ 49,785,123 Local Government Investment Pool $ 23,595,424 C.A.M.P. 0.00 7/1/06 $ 23,595,424 4.95 100.00 $ 23,595,424 U AAA $ 23,595,424 Subtotal $ 23,595,424 4.95 $ 23,595,424 Money Market Fund $ 8,523,030 WF ADVANTAGE GOUT 0.00 7/1/06 $ 8,523,030 4.84 100.00 $ 8,523,030 Aaa AAA ' $ 8,523,030 Subtotal $ 8,523,030 4.84 $ 8,523,030 "U" = Unrated Page 6 of 8 Palm Desert Redevelopment Agency Portfolio Holdings 30 June 2006 Par Value I Issuer Total Investments $ 143,473,578 Cash $ 822,424 HOUSING AUTH CHKG $ 324,756 HOUSING AUTH TRUST $ 1,147,180 Subtotal Total Investments and Cash $ 144,620,758 Corporate Issuers FORD MOTOR CREDIT CORP FIRST UNION NAT BANK WELLS FARGO BANK Market Ratings Coupon I Maturity) Cost I YTM I Price I Value Moody'sI S&P $ 143,312,783 4.69 $ 142,463,416 0.00 7/1/06 $ 822,424 0.00 100.00 $ 822,424 U U 0.00 7/1/06 $ 324,756 0.00 100.00 $ 324,756 U U $ 1,147,180 $ 1,147,180 $ 1",459,963 $ 143,610,596 % of Portfolio (Market Value) 2.09% 1.40% 1.35% "U" = Unrated Page 7 of 8 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 June 2006, the City and the RDA investment portfolios were in compliance with ail 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 25 July 2006, pa zs. �7awm, c. c.,y r * 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% 0.0% 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% 6% 22.7% 38.0% 53601(f) Bankers's Acceptances 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 0.0% 0.0% 53601(h) Negotiable CDs 5 Years 30% 5 Years 30% AA- or Aa3 - - 53601(i) Repos 1 Year No Limit 30 Days 20% AAA & Aaa - - 53601(i) Reverse Repos 92 Days 20% Not Authorized 53601(j) Medium -Term Notes 5 Years 0 30% A 5 Years 30 0/o A 1 13.. 7 0/0 49 0/o 53601(k) Mutual Funds 90 Days 20% AAA & Aaa 90 Days 20% (2) AAA & Aaa 4.9% 6.0% 53601(I) Trust Indenture Debt Not Authorized 53601(m) Secured Bank Deposits 5 Years No Limit Not Authorized 53601(k) Local Government AAA & Aaa I IAAA & AaaI I Investment Pools 90 Days 20% or Advisor 90 Day s + 20% 2 or Advisor 1 O 21.8% 16.5% 53601(n) Mortgage -Backed 5 Years 20% A (Issuer) & Not Authorized Securities AA (Security LAIF No Limit I No Limit 16.9% 34.7% (1) The City loan to RDA, which is not a bond, has been approved by the Palm Desert City Council. 80.0% 100.0% (2) Maximum limit for mutual funds and local government investment pools, excluding bond proceeds. Certified California Municipal Treasurer Page 8 of 8