INVESTMENT
PORTFOLIO
REPORT FOR
DECEMBER 31, 2023
CITY COUNCIL
April 9, 2024
CITY TREASURER’S
OFFICE
• Portfolio Overview
• Economic Conditions
• Outlook and Strategy
CITY TREASURER’S
OFFICE
PORTFOLIO
OVERVIEW
CITY TREASURER’S
OFFICE
$400
$420
$440
$460
$480
$500
$520
$540
$560
$580
$600
City Investment Pool Combined Successor Agency and Housing Authority Historical Market Value
$581 M
$2 M
(in millions)
$44 M
CALPERS
payment
$32 M
CALPERS
payment
4 Portfolio Market Value by Asset Class
Portfolio Market Value
$ 581 M
Negotiable Certificates of Deposit, $56M
10%
Joint Powers Authority Pool, $74
13%
Corporates - Medium
Term Notes, $99M
17%
Money Market, $36M
6%
Municipal Bonds, $66M
11%
Supranational Obligations, $22M
4%
US Agency, $204M
35%
US Treasury Notes, $26M
4%
5 Compliance – Portfolio Allocation
ASSET CLASS MARKET
VALUE PORTFOLIO % LEGAL MAXIMUM POLICY LIMITS COMPLIANCE Negotiable CDs $ 56 M 10% 30% 0 to 30%
Joint Powers
Authority Pool $ 74 M 13% No limit 0 to 25%
Corporates –
Medium Term Notes $ 99 M 17% 30% 0 to 30%
Money Market $ 36 M 6% 20% 0 to 20%
Municipal Bonds $ 66 M 11% No limit 0 to 30%
Supranational
Obligations $ 22 M 4% 30% 0 to 15%
US Agency $ 204 M 35% No limit 0 to 90%
US Treasury $ 26 M 4% No limit 0 to 100%
6 $52
$99
$134
$127
$60
$110
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
0-1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years
Maturity Range
Money Market /
Joint Powers Authority Pool
City
Investment
Pool
(in millions)
Portfolio Duration
1.98 years
7 0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Portfolio Yield 2-Year Treasury 12-Month Rolling Average LAIF Average Monthly Yield Yield
3.93%
4.60%
3.32%
While the yield curve is still
inverted, we continue to invest in
higher yielding liquid securities
while locking in 5-year rates for
guaranteed future income.
8 $0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
Income Summary
$1.5 M
in December 2023
Interest Income
9 ESG Investments Spotlight
Inter-American Development Bank
• Headquartered in Washington, D.C.
• Founded in 1959, the IDB serves as the main source of multilateral financing for economic, social and institutional development in Latin America and the Caribbean, with 26 borrowing member countries • Projects include:
• Amazon Initiative, which promotes the bioeconomy, conservation, sustainable farming and infrastructure, and the wellbeing of indigenous communities in Ecuador
• Raising funds for conservation work in marine areas in Barbados • Improving maternal, neonatal and children’s healthcare in Guyana • Improving preschool and primary education in Guatemala • City of Burbank invested in 5-year non-callable bond yielding 4.43% 10 ECONOMIC
CONDITIONS
CITY TREASURER’S
OFFICE
Labor Market
While the labor force participation
rate for most age groups have
recovered, there is still an estimated
shortfall of almost 2 million workers.
The surge in retirements that started
with the pandemic and continues to
increase is driven by workers age 55
and older without a college degree.
Unemployment
rate at 3.8%
12 Savings
Based on more recent patterns,
however, households still have excess
savings equal to 4% of US GDP .
Household Savings as a Percentage of Disposable Income
While all savings rates have fallen
since Covid, the US saw its savings
rate dip below pre-pandemic levels.
13 Income and Spending
Lower income spending growth also
continues to be stronger than higher
income spending growth.
Lower and middle income
households after-tax income
continues to see steady increases.
Savings and
checking account
balances are still
~40% higher
than in 2019
14 Consumer Sentiment
While 40% said the economy was
worse than last year, a slight majority
rated their personal financial
situation as good or excellent.
Consumers, even those who think
the economy is doing well, believe
that “prices for food and consumer
goods” are poor or only fair.
15 Inflation
Average annual premium for
full-coverage car insurance at
$2,453 for CA (and $4,813 in FL!)
Consumers viewed pandemic hikes
as temporary, but with no signs of
deflation, prices continue to be much
higher than “reference” prices.
Increasing claims, more accidents,
and costlier vehicle repairs have led
to a spike in car insurance premiums. 16
Housing Market
People staying in homes longer
contributes to a lack of inventory and
higher prices. CA homeowners stay
put the longest (18.7 yrs in LA).
With locked-in low rates, fully paid
homes, and other support services,
there is minimal incentive to sell
larger homes and downsize.
17 Asset Prices and Recession Probability
S&P now at
all-time highs
Bitcoin has rebounded
to surpass historic highs
Most polled economists believe
a recession, if it does happen,
will not start until 2026.
18 OUTLOOK AND
STRATEGY
CITY TREASURER’S
OFFICE
5-Year Treasury Yields
5-year Treasury yields remain
elevated as it is uncertain
whether projected rate cuts
will actually happen.
20 Fed Rate Cuts
With higher than expected inflation
and job growth, the market has
revised its expectations and is now
pricing in just two rate cuts.
The Federal Reserve is projecting
three rate cuts this year, but it has
reiterated it needs more proof of
slowing inflation before cutting rates.
21 Fiscal Deficit
With increased spending, annual
issuance of Treasuries has doubled
since the pandemic. If demand
weakens, rates may remain elevated.
Without major reforms to spending
programs such as Social Security and
Medicare, the Debt-to-GDP ratio is
projected to jump up significantly. 22
IMF World Economic Outlook
23 Continuing Strategy
• Ongoing credit monitoring of portfolio holdings
• Comprehensive due diligence of new investmentsSafety
• Maintaining adequate liquidity to meet both anticipated and unexpected cash flow needsLiquidity
• Strategic allocation to invest in assets with higher spreads • Locking in longer-term rates for future incomeYield
24 CITY TREASURER’S
OFFICE
Questions?
Krystle Palmer
City Treasurer
(818) 238-5880
[email protected]