COUNCIL COMMUNICATION
TO: Honorable Mayor and Council
FROM: Tabatha Miller, Administrative Services Director
SUBJECT:Title
Investment Report at June 30, 2016
Bodyody
FUNDING SOURCE:
N/A
PURPOSE:
To present the June 30, 2016 Investment Report to Council.
BACKGROUND:
This investment report conforms to the City's adopted Investment Policy. The investment objectives of the City include safety, liquidity and yield - in that order. Standards of care as described in the Investment Policy have been used when making investment decisions for the City. Additionally, per policy, securities are held by an independent third-party custodian.
As of June 30, 2016, the weighted average rate of return for the City’s investment portfolio (excluding LGIP and JPMorgan Chase) was 1.20%. As a point of comparison, the current yield for the Arizona State Treasurer’s Local Government Investment Pool (LGIP) 700, which invests in medium-term securities backed by the U.S. Government, was 1.12% for the month ending June 30, 2016. The LGIP’s Pool 700 holdings are very similar to those of the City’s investment portfolio and therefore, provide a good benchmark for comparison.
As mentioned in the prior quarterly report, we have added the balance in the City’s main checking account to the investment report. While this account does not earn traditional interest, it does earn an allowance that offsets dollar for dollar the bank service charges. These earnings and the City’s need for liquidity are considered in making investment decisions. During the quarter ending in June, the earnings allowance rate for the JPMorgan Chase account was .45%. The current yield in the LGIP Pool 5 is .39%, and has been as low as .13% this fiscal year.
Although favorable employment reports have increased the talk of increased interest rates by the Federal Reserve in September, there is still uncertainty with the Presidential Election in November and the overall international economy. The current general consensus is that the Federal Reserve will not adjust interest rates until December. Because the City’s two most important investment objectives are safety and liquidity, we will continue to monitor the interest rate environment and purchase securities with the intention to hold to maturity, following a five-year ladder plan.
COMMUNITY IMPACT:
No direct impact. Indirect impact to the community is an increase or decrease in investment earnings based on the market environment which help fund government and enterprise activities.
FISCAL IMPACT:
N/A
ATTACHMENTS:
Council Investment Report - June
SUGGESTED MOTION:Recommneded Actionecommended Action
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