CITY OF SEAL BEACH Preliminary Investment Report 1/31/2014

Transcription

1 CITY OF SEAL BEACH Preliminary Investment Report 1/31/2014 Investments: Book Value Market Value LAIF City 17,500, ,500, LAIF Successor Agency 115, , CDs and Bonds 28,163, ,145, Total Investments: 45,779, ,761, Cash, Deposits, & Accrued Interest: Bank of America - City General Account 454, Bank of America - Successor Agency Deposit in transit Less outstanding checks (268,311.64) Cash with Pershing Cash with 246, Total Cash & Deposits: 538, Total Investments, Cash, and Deposits: 46,317, In compliance with the California Government Code Section and Resolution Number 6038; the City Treasurer of Seal Beach hereby certifies that sufficient investment liquidity and anticipated revenue are available to meet the City's budgeted expenditure requirernents for the next six months.» to ('I) ::J c.. Q) ;:::;: ('I) 3 Investments in this report meet the requirements ofthe City of Seal Beach's adopted investment policy. Respectfully submitted, NOTED AND APPROVED: Victoria L Beatley () Director of Finance/City Treasurer l~

2 CITY OF SEAL BEACH Preliminary Investments Detail Report 1/31/2014 Investment T~ Issuer Settlement Date Maturity Date Interest Rate Book Value Market Value Years to Maturity Source of Market Valuation LAIF City N/A N/A 0.244% 17,500, ,500, LAIF Statement RDA N/A N/A 0.244% 115, , LAIF Statement Total LAIF Invested 17,616, ,616, CDs and Bonds Queensborough Natl Bk & TR CO Webbank Salt Lake City Utah 8/30/ /21/2011 2/28/2014 4/ % 0.700% 245, , , , Aurora Bank GE Capital Financial 5/23/2011 6/3/2011 5/23/2014 6/3/ % 1.450% 240, , , , Marlin Business Bank 6/22/2010 6/23/ % 99, , Gorham Bank 6/25/2010 6/25/ % 99, , Wilmington Trust Co First Bank PR Santurce 7/16/2010 7/20/2011 7/16/2014 7/21/ % 1.350% 98, , , , Barclay's Bank 8/21/2009 8/21/2014 Float 98, , American Express Centurion Bank West San Francisco 8/25/2011 9/14/2011 8/25/2014 9/15/ % 0.900% 245, , , , Cardinal Bank Mclean Va 9/16/2011 9/16/ % 240, , Wells Fargo Bank 4/29/2011 4/29/ % Float 240, , EnerBank USA National Republic Bank of Chicago 12/15/ /23/ /15/ /23/ % 1.350% 100, , , , Landmark Cmnty Bk Collieville Tenn 2/13/ % 248, , US Treasury Notes 8/2/2013 7/31/ % 863, , US Treasury Notes 1/3/ / % 1,205, ,204, US Treasury Notes 5/31/2013 5/31/ % 352, , US Treasury Notes 8/30/2013 8/31/ % 422, , US Treasury Notes 11/14/ /31/ % 997, , CA ST TXBL GO Bonds 3/27/2013 2/ % 150, , CA ST Taxable GO Bonds 11/5/ /1/ % 261, , Univ of Cal TXBL Rev Bonds 10/2/ / % 405, , FNMA Notes 2/ /26/ % 1,032, ,022, FHLB Global Notes 12/30/ /30/ % 749, , FHMA Global Benchmark Notes 2/21/2013 3/15/ % 1,391, ,345, Fannie Mae Global Notes 8/28/2013 3/30/ % 746, , Fannie Mae Global Notes 6/12/2013 3/30/ % 1,244, ,251, Freddie Mac Global Notes 8/2/2013 5/13/ % 1,094, ,101, FNMA Notes 7/10/2013 9/28/ % 935, , FHLMC Notes 10/3/ /14/ % 205, , Fannie Mae Notes 7/8/ / % 753, , FNMA Notes 7/10/2013 4/24/ % 996, ,006, Freddie Mac Global Notes 7/2/2013 6/29/ % 386, , Freddie Mac Global Notes 7/10/2013 9/29/ % 983, , Fannie Mae Global Notes 12/3/ /26/ % 843, , Fannie Mae Global Notes 7/31/ /20/ % 161, , Fannie Mae Global Notes 7/10/ /20/ % 972, , Fannie Mae Global Notes 8/16/2013 5/21/ % 304, , Wal-Mart Stores Inc. 2/26/ /25/ % 575, , International Business Machines 2/21/2013 1/ % 777, ,

3 CITY OF SEAL BEACH Preliminary Investments Detail Report 1/31/2014 Investment Settlement Years to Source of Market Type Issuer Date Maturity Date Interest Rate Book Value Market Value Maturity Valuation General Elec Cap Corp Global Notes JP Morgan Chase & Co Apple Inc Global Notes Toyota Motor Credit Corp Wells Fargo & Company Birkshire Hathaway Fin Global Notes Pfizer Inc Global Notes Berkshire Hathaway Fin Global Notes COCA-COLA Co Credit Suisse New York Cert Depos Rabobank Nederland NV NY CD Nordea Bank Finland NY Skandinaviska Enskilda M & I Bank Oriental Bank San Antonio FCU Farmers and Merchant Union Bank Total CDs and Bonds Accrued Interests Unsettled Trades 3/14/2013 2/26/2013 5/3/2013 5/17/2013 7/29/2013 8/15/2013 6/3/2013 1/10/ /1/ /9/2013 4/29/2013 1/17/2014 1/10/2014 8/11/2009 8/19/ /9/2009 6/17/2010 1/8/2016 1/15/2016 5/3/2016 5/17/2016 7/29/2016 8/15/2016 1/15/2017 8/15/ /1/ /5/2014 4/29/2015 7/17/2015 1/4/2016 8/11/2014 8/19/ /7/2014 6/17/ % 2.600% 0.450% 0.800% 1.250% 0.950% 0.900% 2.000% 1.650% 0.500% 0.600% 0.358% 0.562% 3.100% 3.000% 2.000% 2.550% 834, , , , , , , , , , , , , , , , , ,367, (204,064.46) , , , , , , , , , , , , , , , , , ,349, (204,064.46) 0.00 Unsettled Trades Total Investments 45,779, ,761, One Bank One Bank One Bank One Bank 2

4 City of Seal Beach Investment Review Fourth Quarter 2013 Sarah Meacham, Director PFM Asset Management LLC PFM Asset Management LLC

5 The Federal Open Market Committee (FOMC) shocked markets in September by announcing that they would continue their asset purchase program (Quantitative Easing) when most market participants expected a taper. This announcement prompted a reversal of the rate rising trend from the prior four months. In December, rates started to rise again following the FOMC's announcement that they would begin tapering in January. 2-Year U.S. Treasury Yield January 1, December 31, % ~ ~ "Taper Talk" Begins o.40 % : % ~-~--~~-p-~~~ -~~~ Taper 0.00% +I , , , ~------~ Jan12 Apr 12 Jul 12 Oct 12 Jan 13 Apr13 Jul13 Oct 13 Source: Bloomberg PFM Asset Management LLC 1

6 The Fed's multiple versions of Quantitative Easing were geared towards creating a low-rate environment, and yields at the end of December 2013 were still well below their levels before Quantitative Easing began. 6% Fed Cuts Rate to 0% QE1 QE21 Operation I Operation Twist Twist Extended QE3 5% + -..: ~------~ t % 3% 2% w --J a --F-, 1% tll::--...~ -- A::.-.;:., , ~ ft # Rates Environment Before Quantitative Easing 0% I " Dec-06 Dec-O? Dec-OB Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Source: Bloomberg - 2-Year - 5-Year - 10-Year PFM Asset Management LLC 2

7 Over the past several years, the value offered by Federal Agencies over similar-maturity U.S. Treasuries has continuously diminished. The supply of Federal Agencies has declined by more than $1 trillion since the financial crisis and will continue to decline as FNMA and FHLMC work to shrink their internal portfolios of mortgages. 2-Year U.S. Treasury and Federal Agency Yields January 1, 2010-December 31, % ~ ~ 1.40% - 2-Year Federal Agency 1.20% - 2-Year U.S. Treasury 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% +I , , ~------_, ,_ r_------_,------~ Jan 10 Jul10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul13 Source: Bloomberg PFM Asset Management LLC 3

8 With short-maturity yields anchored by the Fed Funds rate, the rise in longer-term rates left the yield curve in December 2013 much steeper than it was during most of the year. 2.0% 1.8% 1.6% 1.4% 1.2% "C.9! 1.0% -1 > 0.8%. 0.6% 0.4% J u.s. Treasury Yield Curve - December 31, _ /31/ /31/ September 30, 2013 r _ / -- I 1 3 Month 0.04% 0.01% 0.07% - December 31, 2013 : 6 Month 0.11% 0.03% 0.09% / - ~, 1 Year 0.14% 0.09% 0.11% 2 Year 0.25% 0.32% 0.38% _. k '~_ ~ 3 Year 0.36% 0.63% 0.80% 0.2% 1 - _ L JP , 0.0% Year 0.72% 1.38% 1.74% M M Y Y Y Y Maturity PFM Asset Management LLC 4

9 Third quarter GOP surprised the market. In the third quarter, the 4.1 % annualized growth rate far exceeded the market expectation of 2.0%. It is important to note that the upward surprise was largely attributed to a sizable increase in inventories. Fourth quarter aop growth of 3.2% also exceeded the market expectations, which were 2.6%. Consumer spending contributed positively to this growth. -,:, Q) -- (/) 4% ::l :0 «>. 2% = Q) co- c: co 00::: 0% (/) co-':' Q) Q) (f).~ -2%. - co Q) ::l C)c: c: c: -4% co«~ U :::.!2. 0 a a 6% -6% 0-8% -10% C"'") a 2008 Bloomberg Survey of Economists PostRe-cessron --Avera-ge --=-2 : 4~/o C"'") a Source: Bureau of Economic Analysis PFM Asset Management LLC 5

10 In 2013, the economy added 2.2 million new jobs, signaling an improving labor market. In January 2014, the economy added only 113,000, missing the market's expectation of 180,000. Despite the negative surprise in the number of new jobs added, the unemployment rate fell to 6.6% in January. Much of the decline in the unemployment rate is attributable to a decline in the labor force participation rate, which ended the year at 62.8%, a 35-year low Unemployment Rate and Change in Nonfarm Payrolls 600K r ~ 12% 7.7 Million Jobs Gained 400K 200K -200K -400K -600K -800K OK II I' I... a..:,' ~ 'I II I ',,, % 10% 8% 4% - Change in Non-Farm Payrolls (left axis) 2% - Unemployment Rate (right axis) 8.8 Million Jobs Lost -1,000K ' I 0% Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Source: Bureau of Labor Statistics PFM Asset Management LLC 6

11 Janet Yellen is generally considered a "dove" and a Federal Reserve insider; the market expects her to continue the monetary policy path of the current Fed Chairman, Ben Bernanke. Education Brown University: B.A. in Economics Yale University: Ph.D. in Economics Career Professor at University of California, Berkeley since 1980 Served on the Federal Reserves Board of Governors from Chair of the President's Council of Economic Advisers from (Clinton Administration) President of the Federal Reserve Bank of San Francisco from Nominated in 2010 as Vice-Chair of the Federal Reserve System (Obama Administration) Source: Federal Reserve PFM Asset Management LLC 7

12 Our investment strategy for the fourth quarter was based on our view that interest rates would trend gradually higher in anticipation of the Federal Reserve tapering its bond purchases. The key components of our strategy included: Maintaining a defensive duration posture to protect portfolio value Emphasizing high-quality credit instruments as they offer value over Treasury and Federal Agency securities Monitoring yield spreads and relative value between sectors PFM Asset Management LLC 8

13 Our strategy for the fourth quarter proved to be effective. The return of the City's portfolio for the fourth quarter exceeded the return of the performance benchmark, as it has since inception. Total Returns for periods ending December 31, 2013 Duration Past Past Quarter Past Since (Years) Quarter Annualized 6 Months Inception City of Seal Beach % 0.76% 0.74% 0.49% Merrill Lynch 1-5 Year U.S. Treasury Index % -0.44% 0.35% 0.24% Performance on trade date basis, gross (i.e., before fees), in accordance with the CFA Institute's Global Investment Performance Standards (GIPS). Merrill Lynch Indices provided by Bloomberg Financial Markets. Inception date is second quarter PFM Asset Management LLC 9