Agenda, special meeting, second session — City Council Subcommittee, August 26, 2024

Finance Subcommittee Agenda
City of Campbell, 70 N. First Street, Campbell, California

This Special Meeting of the Finance Subcommittee will be conducted in person compliant with provisions of the Brown Act.

Members of the public may attend this meeting in person at Campbell City Hall.

Public comment will also be accepted via email at [email protected] prior to the meeting. Please indicate in the subject line “FOR PUBLIC COMMENT.” Written comments received by 9:00 a.m. on the day of the meeting will be posted on the website and distributed to the Sub-Committee before the meeting.

SPECIAL MEETING OF THE CAMPBELL FINANCE SUBCOMMITTEE
Monday, August 26, 2023 10:00 a.m.

Campbell City Hall
Ralph Doetsch Conference Room
70 North First Street, Campbell CA 95008

CALL TO ORDER

PUBLIC COMMENTS

1. Review of Annual Investment Policy and Strategy Updates

Recommended Action: Receive and accept FY 2025 Annual Investment Policy and Strategy Updates and provide feedback and recommendation for acceptance by the City Council.

ADJOURN

In compliance with the Americans with Disabilities Act, assistive listening devices are available for meetings held in the Council Chambers. If you require accommodation to participate in the meeting, please contact Will Fuentes in the Finance Department, at [email protected] or (408) 866-2113.

A Finance Sub-Committee Mee ting has bee n scheduled for Monday, August 26 at 10:00 am in the Doetsch Conference Room to discuss the annual review of the Investment Policy update.

California Government Code recommends that the City Council review the City’s Investment Policy annually. The City’s I nvestment Policy requires the Finance Sub - Committee to review any proposed changes and make recommendation s to the Council accordingly. It also requires the Sub -Committee to review the Investment Strategy annually as well and share a summary of that strategy with Council.

The Investment Policy is updated annually to conform to California Government Code (CGC) Section 53600 et. seq. Any statutory revisions made during the previous calendar year that impact the City policy are incorporated as necessary and shown in the attached Redline and Clean versions of the policy. In addition to statutory revisions, staff and the City’s new investment advisors (Chandler) are recommending several revisions below. All page numbers reference the Redline version:
• Header – Modified to September 3, 202 4 throughout to reflect tentative Council review and approval date.

• Page 5 – Per best practices, added language regarding compliance with Political Reform Act, Fair Political Practices Commissions Regulations, and the City’s Conflict of Interest Policy.

• Page 6 – Updated the risk management language for Federal Agency Bonds; adding issuer limitations as well as callable limits.

• Page 6 – Per best practice and CGC, clarified that no more than 30% of the total portfolio may be invested in any single Agency/ Government Sponsored Enterprise (GSE) issuer. And no more than 20% of the total portfolio may be invested in callable agency securities.

• Page 7 – Per best practice and CGC, added maximum maturity language of no more than 180 days for Eligible Bankers Acceptances.

• Page 7 – Per best practice and to reduce risk, lowered maximum percentage of total portfolio from 25% to 20% for Non-negotiable Time Certificates of Deposit.

City of Campbell

MEMORANDUM
Finance Department

To: Finance Sub-Committee Date: August 26, 2024

From: Will Fuentes, Finance Director

Subject: FY 2024-25 Annual Investment Policy and Investment Strategy Update

• Page 7 – Per best practice and CGC, clarified that the maximum maturity on Certificates of Deposit may not exceed 5 years.

• Page 7 – To enhance investment flexibility and in compliance with CGC, added Negotiable Certificates of Deposit (NCDs) to allowable investments list.

• Page 8 – Per best practice and to reduce risk, lowered maximum percentage of total portfolio from 15% to 10% for Mutual Funds.

• Page 8 – Per best practice and to enhance investment flexibility , increased maximum percentage of total portfolio from 15% to 20% for Money Market Mutual Funds. It is not anticipated that this change will significantly increase risk in the City’s overall portfolio.

• Page 8 – Per best practice and to enhance investment flexibility , increased maximum percentage of total portfolio from 10% to 30% for Municipal and State Obligations. It is not anticipated that this change will significantly increase risk in the City’s overall portfolio.

• Page 8 – So as to be in alignment with Senate Bill (SB) 882, added clarifying language regarding Asset-Backed, Mortgage-Backed, Mortgage Pass-Through Securities, and Collateralized Mortgage Obligations.

• Page 9 – Removed note regarding maximum portfolio percentage for Money Market and Mutual Funds and moved detail those sections of the Investment on

Page 8 ends

• Page 9 – So as to be in alignment with SB 1489, added clarifying language that the purchase of a security with a forward settlement date exceeding 45 days from the time of investment is prohibited.

• Page 10 – So as to align with market benchmarks and allowable securities with maturities up to 5 years , replaced weighted average maturity language with duration language.

• Page 10 – Per best practice and CGC, Added the requirement of monthly transactions to the list of requirements for the quarterly report.

• Page 10 – Per best practice and CGC, moved the monthly transactions report requirement to be included in the quarterly report.

• Page 11 – Per best practice and CGC, updated language regarding Collateralization.

• Page 13 – Since detailed terms for Authorized Securities and Transactions are shown in Section V, recommending removing table summarizing the same terms since the table can easily become misaligned with the detailed terms and cause confusion . Sufficient detail is provided in Section V and inclusion of

duplicate information in the summary table is not necessary for staff or the City’s investment advisors to fully comply with the Investment Policy.

The attached Investment Strategy also provides a review of the City’s current strategy with respect to the investment portfolio and staff and the City’s investment advi sor recommendations for the upcoming year. Additionally, an economic review of the past year and summary of current economic conditions is provided.

Attachments: Investment Policy
Investment Strategy Memorandum

Distribution:

Anne Bybee, Vice Mayor
Sergio Lopez, Council Member
Brian Loventhal, City Manager
Angelique Gaeta, Assistant City Manager

City of Campbell, California
Investment Policy Date: September 53, 20243

1 I. PURPOSE
It is the policy of the City of Campbell to invest public funds in a prudent manner which conforms to all statutes governing the investment of public funds while providing security and meeting the daily cash flow needs of the City.

The purpose of this document is to identify the policies guiding prudent investment of the City’s temporarily idle funds and to establish guidelines and objectives for suitable investments including delegation of authority, prudence, monitoring and reporting, policy review, diversification, eligible securities, safekeeping, collateralization, se lection of financial institutions and broker/dealers, glossary of terms, and forms utilized.

II. SCOPE
A. This investment policy shall apply to all financial assets, investment activities, and debt issues (excluding those debt issues subject to governing documents) of the City of Campbell including the following fund types:

1. General Fund

2. Special Revenue Funds

3. Debt Service Funds

4. Capital Projects Funds

5. Internal Service Funds

6. Trust and Agency Funds
B. The policy does not cover funds held by the Public Employees Retirement System nor funds of the Deferred Compensation program.

III. OBJECTIVES
A. It is the objective of this policy to provide a system which will monitor and forecast revenues and expenditures so that the City can invest temporarily idle funds to the fullest extent possible. The temporarily idle funds shall be invested in accordance with provisions of California Government Code Section 53600 et. seq.

B. The City adheres to conservative investment philosophies including investment of all idle cash, preservation of principal at the risk of yield, maintenance of adequate liquidity to meet anticipated cash flow needs and diversification to avoid the risks inherent in over investing in any one asset class.

C. This policy specifically prohibits trading securities for the sole purpose of speculating on the future direction of interest rates. It further prohibits reverse repurchase agreements, use of derivative products, and/or leveraging of the portfolio.

D. The City shall ensure the safety of invested funds by limiting credit and interest rate risks. The three primary objectives of the City's Investment Policy in order of priority are:

City of Campbell, California
Investment Policy Date: September 53, 20243

2 1. Safety: Safety of principal is the foremost objective of the City of Campbell.

Safety and the minimizing of risk associated with investing refer to attempts to reduce the potential for loss of principal, interest or a combination of the two. The City ensures safety of its invested idle funds and limits credit and interest rate risks by following these guidelines (all of which are detailed within the body of the Investment Policy):
a. Investing only in those instruments that are generally accepted as safe investment vehicles for local government as authorized by this Policy,
b. Carefully reviewing the qualifications and financial strength of financial institutions and broker/dealers prior to conducting business with them,
c. Diversifying the investment portfolio as prescribed within this Policy,
d. Structuring the portfolio such that securities mature to meet the City's cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to their maturation,
e. Limiting the final maturity of purchased securities to five years; limiting the weighted average maturity of the portfolio to three years, and
f. Ensuring the physical security or safekeeping of the City's investments.

2. Liquidity: Liquidity is the second most important objective of the City's Policy.

Liquidity refers to the ability to convert an investment to cash promptly without loss of principal and minimal loss of interest. For example, this is accomplished by maintaining sufficient balances in liquid investment products, such as the Local Agency Investment Fund (LAIF) or other local government investment pools which offer same day availability, or by investing in securities with active secondary or resale markets.

3. Return: Return on the City's portfolio is last in rank among investment objectives. Investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.

IV. STRUCTURE AND RESPONSIBILITY
A. DELEGATION OF AUTHORITY:

1. The City Council assumes direction over the City’s investments, and assigns management responsibility for the investment program to the Finance Director, who shall serve as Chief Fiscal Officer, and have legal custody of funds. The Finance Director may provide for delegation of his/her responsibilities to other persons under his/her control responsible for investment transactions, including City of Campbell, California
Investment Policy Date: September 53, 20243

3 the delegation of certain portions of the investment portfolio to one or more external and qualified investment advisers or such other designee approved by the Finance Sub-Committee. External investment advisors who are engaged b by the City shall be registered under the Investment Advisers Act of 1940 and shall assist in the management of the City's investment portfolio in a manner consistent with the City's objectives. External investment advisers may be granted discretion to purchase and sell investment securities in accordance with this investment policy.

B. POLICY REVIEW:

1. This Investment Policy shall be reviewed and approved annually as recommended by California Government Code Section 53600 et. seq.

C. RESPONSIBILITIES:

1. Responsibilities of the City Council: The City Council consists of a Mayor and four Council members and is the policy setting board for the City of Campbell. The City Council has considered and adopted a written Investment Policy for the City of Campbell. Pursuant to the City's Financial Policies, the City Council shall on an annual basis, approve necessary changes to the Investment Policy as recommended by the Finance Sub -Committee. On a quarterly basis, the City Council shall receive, review and accept the Quarterly Investment Report submitted by the Finance Department.

2. Responsibilities of the Finance Sub -Committee: The Finance Sub - Committee consists of two Council members, the City Manager, the Finance Director, and the Assistant Finance Director. On an annual basis, this Sub - Committee shall review necessary revisions to the established Investment Policy of the City of Campbell and make a recommendation to the City Council accordingly. No less than once per fiscal year, the City's investment strategy will be reviewed by the Finance Sub -Committee. A summary of the investment strategy will be shared with the City Council at that time. Should market activity encourage revisions in the City's strategy, the Finance Sub-Committee shall be advised accordingly.

3. Responsibilities of the City Manager: The City Manager is responsible for directing and supervising the Finance Director. He/she has the responsibility of keeping the City Council fully advised as to the financial condition of the City. a. Wire Transfer Authority: The City Manager has unlimited wire transfer authority for a single transaction. Such a transaction requires joint review, approval and verification in advance by the City Manager and Finance Director. The transaction shall be highlighted in the Quarterly Investment Report to Council.

4. Responsibilities of the Finance Director: The Finance Director is appointed by the City Manager and serves as Chief Fiscal Officer. He/she is subject to the direction and supervision of the City Manager. The Finance Director is charged with the responsibility for the conduct of all Finance Department functions including the custody and investment of City funds, and investment of those funds in accordance with principles of sound treasury management and in accordance with applicable laws and policies. Refer to "Delegation of Authority" for additional information pertaining to delegation of investment responsibilities.

City of Campbell, California
Investment Policy Date: September 53, 20243

4 a. Wire Transfer Authority: The Finance Director has wire transfer authority not to exceed $5,000,000 for a single transaction. Such a transaction shall be reviewed, approved and verified in advance by the City Manager. The transaction shall be highlighted in the Quarterly Investment Report to Council.

5. Responsibilities of the Assistant Finance Director: The Assistant Finance Director is appointed by the Finance Director and serves as the Investment Manager for the City pursuant to specific delegation authority provided by this Investment Policy. He/she is subject to the direction and supervision of the Finance Director and is charged with the responsibility and conduct of the day - to-day accounting and cash management functions of the City. This includes the custody and investment of City funds, and inves tment of those funds in accordance with principles of sound treasury management and in accordance with applicable laws and policies. Refer to "Delegation of Authority" for additional information pertaining to delegation of investment responsibilities.

Implementation and maintenance of the Investment Policy are the responsibility of this individual. On an annual basis, the Assistant Finance Director shall present to the Finance Sub -Committee, recommended changes to the City's Investment Policy. On a quarterly basis, the Assistant Finance Director shall present to the City Council, via the City Manager, a Quarterly Investment Report.

Refer to "Monitoring and Reporting" for additional information. a. Wire Transfer Authority: The Assistant Finance Director has wire transfer authority not to exceed $3,000,000 for a single investment transaction.

Such a transaction shall be reviewed, approved and verified in advance by the Finance Director, and shall be reported in the Quarterly Investment Report to Council.

6. Responsibilities of the Accountant: The Accountant is appointed by the Finance Director and is subject to the direction and supervision of the Assistant Finance Director. The Accountant carries out the specific instructions provided by the Assistant Finance Director regarding the purchase and sale of securities in accordance with principles of sound treasury management and in accordance with applicable laws and policies. Accounting for the various investment transactions is the responsibility of the Accountant.
a. Wire Transfer Authority: The Accountant has wire transfer authority not to exceed $2,100,000 for a single investment transaction. The standard operating procedure is that all cash and investment wire transfers made by the Accountant and Senior Accountant are reviewed, approved and verified in advance by the Assistant Finance Director, and are reported in the Quarterly Investment Report to Council.

D. Prudence:

1. Pursuant to California Government Code, Section 53600.3, all persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the Prudent Investor Standard. This means that all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to City of Campbell, California
Investment Policy Date: September 53, 20243

5 this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the Agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the Agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law.

2. The City’s overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The City recognizes that no investment is totally riskless and that the investment activities of the City are a matter of public record. Accordingly, while the intent of the City is to hold purchased securities to maturity, the City recognizes that occasional measured losses may be advisable in a diversified portfolio and shall be considered within the context of the overall portfolio's return, provided that (a) adequate diversification has been implemented and (b) the sale of a security is in the best long-term interest of the City.

E. Ethics and Conflicts of Interest:

Elected officials and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the City’s investment program or could impair or create the appearance of an impairment of their ability to make impartial investment decisions. Employees and investment officials shall disclose to the City Manager any business interests they have in financial institutions that conduct business with the City, and they shall subordinate their personal investment transactions to those of the City. In addition, the City Manager, the Finance Director and others with delegated investment authority shall file a Statement of Economic Interests each year pursuant to California Government Code Section 87203 and regulations of the Fair Political Practices Commission.

All participants in the investment process are required to comply with terms of the Political Reform Act, Fair Political Practices Commission Regulations promulgated thereunder (2 C.C.R. §§ 18110 through 18998), the City’s Conflict of Interest Policy, including, without limitation, filing of Form 700, notification and recusal obligations, and Government Code section 1090 prohibitions.

Conflict with State Statutes or Regulations

1. In the instance of any conflict between the City of Campbell Investment Policy and Government Code Section 53600 et seq, the more stringent requirement shall apply.

V. AUTHORIZED SECURITIES AND TRANSACTIONS
All investments and deposits of the City shall be made in accordance with California Government Code Sections 16429.1, 53600-53609 and 53630-53686, except that pursuant to California Government Code Section 5903(e), proceeds of bonds and any moneys set aside or pledged to secure payment of the bonds may be invested in securities or obligations described in the ordinance, resolution, indenture, agreement, or other instrument providing for the issuance of the bonds. Any revisions or extensions of these code sections will be assumed City of Campbell, California
Investment Policy Date: September 53, 20243

6 to be part of this Policy immediately upon being enacted. However, in the event that amendments to these sections conflict with this Policy and past City investment practices, the City may delay adherence to the new requirements when it is deemed in the best interest of the City to do so. Percentage holdings limits listed in this section apply at the time the security is purchased.

The City has further restricted the eligible types of securities and transactions to the following:

1. United States Treasury bills, notes, bonds, or strips with a final maturity not exceeding five years from the date of purchase.

2. Federal Agency debentures and mortgage -backed securities with a final maturity not exceeding five years from the date of purchase issued by the Government National Mortgage Association (GNMA). The aggregate investment in Federal Agency obligations shall not exceed 75% of the City’s total portfolio. No more than 30% of the total portfolio may be invested in any single Agency issuer. No more than 20% of the total portfolio may be invested in callable agency securities.

3. Federal Instrumentality (government sponsored enterprise (GSE)) debentures, discount notes, callable and step-up securities, with a final maturity not exceeding five years from the date of purchase, issued by the following only: Federal Home Loan Banks (FHLB), Federal National Mortgage Association (FNMA), Federal Farm Credit Banks (FFCB) and Federal Home Loan Mortgage Corporation (FHLMC). The aggregate investment in Federal Instrumentality obligations shall not exceed 75% of the City’s total portfolio. No more than 30% of the total portfolio may be invested in any single Agency/GSE issuer. No more than 20% of the total portfolio may be invested in callable agency securities.

4. Repurchase Agreements with a final termination date not exceeding one year collateralized by U.S. Treasury obligations, Federal Agency securities, or Federal Instrumentality securities listed in items 1, 2 and 3 above with the maturity of the collateral not exceeding five years. For the purpose of this section, the term collateral shall mean purchased securities under the terms of the City’s approved Master Repurchase Agreement. The purchased securities shall have a minimum market value including accrued interest of 102% of the dollar value of the transaction. Collateral shall be held in the City's custodian bank, as safekeeping agent, and the market value of the collateral securities sha ll be marked-to-the-market daily. The aggregate investment in repurchase agreements shall not exceed 10% of the City’s total portfolio.

Repurchase Agreements shall be entered into only with broker/dealers that have executed a City approved Master Repurchase Agreement with the City. Repurchase counterparties shall be recognized as Primary Dealers with the Federal Reserve Bank of New York, or shall have a primary dealer within their holding company structure. Broker/dealers approved as Repurchase Agreement counterparties shall have a short -term credit rating of at least A-1 or the equivalent and a long-term credit rating of at least A or the equivalent.

The Finance Director shall maintain a copy of the City's approved Master Repurchase Agreement along with a list of the broker/dealers that have executed a Master Repurchase Agreement with the City.

5. Prime Commercial Paper with a maturity not exceeding 270 days from the date of purchase with the highest ranking or of the highest letter and number rating as provided for by a Nationally Recognized Statistical Ratings Organization (NRSRO). The entity that issues the commercial paper shall meet all of the following conditions in eith er sub-paragraph a.

City of Campbell, California
Investment Policy Date: September 53, 20243

7 or sub-paragraph b. below:
a. The entity shall (1) be organized and operating in the United States as a general corporation, (2) have total assets in excess of five hundred million dollars ($500,000,000) and (3) have debt other than commercial paper, if any, that is rated “A” or higher by a NRSRO.
b. The entity shall (1) be organized within the United States as a special purpose corporation, trust, or limited liability company, (2) have program wide credit enhancements, including, but not limited to, over collateralization, letters of credit or surety bond and (3) have commercial paper that is rated “A -1” or higher, or the equivalent, by a NRSRO.

No more than 5% of the City’s total portfolio may be invested in the commercial paper and medium-term notes of any single issuer, and the aggregate investment in commercial paper shall not exceed 25% of the City’s total portfolio.

6. Eligible Bankers Acceptances provided that no more than 5% of the City’s total portfolio may be invested in banker’s acceptances of any one issuer, and the aggregate investment in banker’s acceptances shall not exceed 30% of the City’s total portfolio. The maximum maturity does not exceed 180 days.

7. Medium Term Notes issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States, with a final maturity not exceeding five years from the date of purchase, and are rated in a rating category of “A” or its equivalent or better by at least one NRSRO. No more than 5% of the City’s total portfolio may be invested in medium term notes of any one issuer and the aggregate investment in medium term notes shall not exceed 30% of the City’s total portfolio.

8. Non-negotiable Time Certificates of Deposit and savings deposits with a maturity not exceeding five years, in state or nationally chartered banks or savings and loans with a California branch office that are insured by the FDIC. Time Certificates of Deposit exceeding the FDIC insured amount must be secured pursuant to California Government Code Section 53652. No more than $1 million may be invested in non -negotiable time certificates of deposit of any one issuer and the aggregate amount invested in non - negotiable time certificates of deposit shall not exceed 2520% of the City’s total portfolio.

9. Certificates of Deposit at commercial bank, savings bank, or savings and loan association that uses a private sector entity (Certificate of Deposit Account Registry Service) that assists in the placement of certificates of deposit, provided that the purchase of certificates of deposit do not, in total, exceed 30% of the City’s funds that may be invested for this purpose. The City shall choose a nationally or state chartered commercial bank in California as the “selected” depository institution to invest the funds. The selected depository institution may submit the funds to a CDARS for the benefit of the City’s account.

The full amount of the principal and interest that may be accrued during the maximum term of each certificate shall be insured by the FDIC. The maximum maturity does not exceed 5 years

9.10. Negotiable Certificates of Deposit (NCDs) issued by a nationally or state-chartered bank, a savings association or a federal association, a state or federal credit union, or by a federally licensed or state-licensed branch of a foreign bank, provided that the purchase of City of Campbell, California
Investment Policy Date: September 53, 20243

8 certificates of deposit do not, in total, exceed 30% of the City’s funds that may be invested for this purpose. The amount of the NCD insured up to the FDIC limit does not require any credit ratings. Any amount above the FDIC insured limit must be issued b y institutions which have short-term debt obligations rated “A-1” or its equivalent or better by at least one NRSRO; or long-term obligations rated in a rating category of “A” or its equivalent or better by at least one NRSRO. The maximum maturity does not exceed 5 years and no more than 5% of the total portfolio may be invested in any single issuer.

10.11. State of California’s Local Agency Investment Fund (LAIF) , pursuant to California Government Code Section 16429.1.

11.12. Mutual Funds registered under the Investment Company Act of 1940 that (1) are “no- load” (meaning no commission or fee shall be charged on purchases or sales of shares); (2) invest only in the securities and obligations authorized in this policy and (3) have a rating of AAA by Standard and Poor's, Aaa by Moody's or AAA/V1+ by Fitch. No more than 10% of the City’s total portfolio may be invested in mutual funds of any one issuer, and the aggregate investment in mutual funds shall not exceed 1510% of the City’s total portfolio.

The combined aggregate investment in mutual funds and money market funds shall not exceed 20% of the total portfolio.

12.13. Money Market Mutual Funds registered under the Investment Company Act of 1940 that (1) are “no-load” (meaning no commission or fee shall be charged on purchases or sales of shares); (2) have a constant daily net asset value per share of $1.00; (3) invest only in the securities and obligations authorized in this policy and (4) have a rating of at least two of the following: AAA by Standard and Poor's, Aaa by Moody's or AAA/V1+ by Fitch. No more than 1020% of the City’s total portfolio may be invested in the shares of any on money market funds of any one issuer, and the combined aggregate investment in mutual funds and money market funds shall not exceed 1520% of the total portfolio.

13.14. Municipal and State Obligations with a minimum long-term rating of A/A-1 or higher by Standard and Poor’s and not exceeding 1030% of the portfolio and the maximu m maturity does not exceed 5 years:
(a) Bonds Issued by the Local Agency (City of Campbell) including bonds payable solely out of the revenue from a revenue-producing property owned, controlled, or operated by the local agency or by a department, board, agency, or authority of the local agency.) (b) State Obligations including registered treasury notes or bonds of this State and any of the other 49 states in addition to California, including bonds payable solely out of the revenue from a revenue-producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of the any of the other 49 United States, in addition to California.
(c) California Local Agency obligations including bonds, notes, warrants, or other evidence of indebtedness of any local agency within this state, including bonds payable solely out of the revenue from a revenue-producing property owned, controlled, or operated by the local agency or by a department, board, agency, or authority of the any of the local agency.
(d) No more than 5% of the portfolio may be invested in any single issuer.

14.15. Asset-Backed, Mortgage -Backed, Mortgage Pass -Through Securities, and Collateralized Mortgage Obligations from Issuers Not Defined in sections 1, 2 and 3 of the Authorized Securities and Transactions Elsewhere in the Authorized Investments City of Campbell, California
Investment Policy Date: September 53, 20243

9 Section of This Policy, provided that:
(a) The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
(b) No more than 20% of the total portfolio may be invested in these securities. (c) No more than 5% of the portfolio may be invested in any single Asset-Backed security issuer.
(d) The maximum legal final maturity does not exceed five (5) years.

15.16. Supranationals, provided that:
(a) Issues are US dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter -American Development Bank.
(b) The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
(c) No more than 30% of the total portfolio may be invested in these securities. (d) No more than 10% of the portfolio may be invested in any single issuer. (e) The maximum maturity does not exceed five (5) years.

Note: Per state statute, the maximum combination of Mutual Funds and Money Market Mutual Funds is 20% of the portfolio.

It is the intent of the City that the foregoing list of authorized securities and transactions is strictly interpreted. Any deviation from this list must be preapproved by the City Council writing.

16.17. Shares of Beneficial Interest Issued by a Joint Powers Authority (JPA) organized pursuant to Section 6509.7 that invests in the securities and obligations authorized in subdivisions
(a) to (q), inclusive. Each share shall represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority and be rated AAA or equivalent. To be eligible under this section, the joint powers authority issuing the shares shall have retained an investment adviser that meets all of the following criteria:
(a) The adviser is registered or exempt from registration with the Securities and Exchange Commission.
(b) The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (q), inclusive. (c) The adviser has assets under management in excess of five hundred million dollars ($500,000,000).

17.18. Prohibited Investment Vehicles and Practices
a. State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options. b. In accordance with Government Code, Section 53601.6, investment in inverse floaters, range notes, or mortgage derived interest-only strips is prohibited. c. Investment in any security that could result in a zero interest accrual if held to maturity is prohibited. Under a provision sunsetting on January 1, 2026, securities backed by the U.S. Government that could result in a zero - or negative-interest accrual if held to maturity are permitted.
d. Purchasing or selling securities on margin is prohibited. e. The purchase of foreign currency denominated securities is prohibited.

City of Campbell, California
Investment Policy Date: September 53, 20243

10 f. Agencies that are not Qualified Institutional Buyers (QIB) as defined by the Securities and Exchange Commission are prohibited from purchasing Private Placement Securities. The SEC defines a QIB as having at least $100,000,000 in securities owned and invested.
f.g. The purchase of a security with a forward settlement date exceeding 45 days from the time of investment is prohibited.

VI. PORTFOLIO MATURITIES AND LIQUIDITY
To the extent possible, investments shall be matched with anticipated cash flow requirements and known future liabilities. The City will not invest in securities maturing more than five years from the date of settlement, unless the City Council has granted authority to make such an investment at least three months prior to the date of investment. The duration of the portfolio will generally be approximately equal to the duration (typically, plus or minus 20%) of a Market Benchmark, an index selected by the City based on the City’s investment objectives, constraints and risk tolerances.The weighted average final maturity of the City’s portfolio shall at no time exceed 3 years.

VII. MONITORING AND REPORTING
A. The Finance Director shall routinely monitor the contents of the portfolio and shall file with the City Council the Assistant Finance Director's Investment Report at the first regularly scheduled City Council meeting after 45 days from the end of the quarter. The reports shall be prepared and submitted in accordance with California Government Code Section 53646 and shall include the following on all invested monies:
➢ Type of Investment and Issuer
➢ Beginning Balances
➢ Purchases During Quarter
➢ Monthly transactions including all Maturities andor Sales During the Quarter ➢ Ending Balances
➢ Maturity Date
➢ Weighted Average Final Maturity
➢ Call Provisions (if any)
➢ Interest Rate
➢ Weighted Average Yield
➢ Face Value or Purchase Cost
➢ Market Value including source
➢ Interest Earned During Quarter
➢ Interest Earned to Maturity
➢ Cash Flow Projection for the Following Quarter
➢ Summary of Cash Invested to Total Cash Balances
➢ Comparative Statistics by Fiscal Year
➢ Reconciliation of Cash & Investments to General Ledger Balances ➢ Investments under the Management of Contracted Parties ➢ Statement of Compliance with the Investment Policy
➢ Statement of Ability to Meet Obligations of Next Six Months

B. In addition to the Quarterly Investment Report, monthly transaction reports will be submitted by the Finance Director to City Council within 45 days of the end of the reporting period in accordance with California Government Code Section 53607.

City of Campbell, California
Investment Policy Date: September 53, 20243

11 VIII. SELECTION OF BROKER/DEALERS
The City shall transact business with securities broker/dealers after careful review of their qualifications and creditworthiness. In selecting broker /dealers, the Finance Director or designated staff member shall select broker/dealers representing primary dealers in government securities that have established offices and order desks within the State of California, or with such firms that have a primary dealer within their holding company structure.

Exceptions to this rule will be made only upon the joint written authorization of the Finance Director and City Manager. Staff shall investigate broker/dealers wishing to do business with the City to determine if they are adequately capitalized, are reputable, have pending legal action against the firm or the individual broker, have established offices and order desks within the State of California, and make markets in the securities appropriate to the City’s needs.

Before accepting funds or engaging in investment transactions with the City, the supervising officer at each authorized broker/dealer shall submit and annually update a City approved Broker/Dealer Information Request form that includes the firm’s most rece nt audited financial statement. The Finance Director, or his or her designee, shall maintain a list of approved broker/dealers. Broker/dealers shall attest in writing that they have received and reviewed a copy of this Investment Policy, and that they will comply with it and disclose potential conflicts or risks to public funds that might arise out of business transactions between the firm and the City of Campbell. If the City has engaged the services of an outside professional investment advisor, the investment advisor may use its own list of authorized broker -dealers to conduct transactions on behalf of the City.

IX. DELIVERY, SAFEKEEPING AND COLLATERALIZATION
A. Delivery:

1. All investment transactions shall be conducted on a delivery -versus-payment (DVP) basis.

B. Safekeeping:

1. The City shall contract with a bank or banks for the safekeeping of securities which are owned by the City as a part of the investment portfolio. Staff shall periodically review the performance and pricing of the third -party, safekeeping agent services.

2. All investment securities (except the collateral for certificates of deposit in banks, and/or savings and loans) purchased by the City shall be held in third -party safekeeping by an institution designated as primary agent. The primary agent shall issue a safekeeping receipt to the City listing the specific instrument, rate, maturity and other pertinent information, and shall provide monthly reports of activity and ending balances for all securities held on behalf of the City.

C. Collateralization:

1. Deposit-type Certificates of Deposit (CDs). The Agency shall require any commercial bank or savings and loan association to deposit eligible securities with an agency of a depository approved by the State Banking Department to secure any uninsured portion of a Non -Negotiable Certificate of Deposit. The value of eligible securities as defined pursuant to California Government Code, Section 53651, pledged against a Certificate of Deposit shall be equal to 150% of the face value of the CD if the securities are classified as mortgages and 110% of the face value of the CD for all other classes of security. securities (i.e. certificates of deposit) shall be collateralized through the State of California City of Campbell, California
Investment Policy Date: September 53, 20243

12 collateral pool requirements for any amount exceeding FDIC coverage in accordance with California Government Code Section 53652 and/or 53651(m) (1). Collateral for certificates of deposit shall be held in a trust company located in California, the trust department of a bank located in California or the Federal Home Loan Bank of San Francisco.

2. Other Collateralization of Bank Deposits. This is the process by which a bank or financial institution pledges securities, or other deposits for the purpose of securing repayment of deposited funds. The Agency shall require any bank or financial institution to comply with the collateralization criteria define d in California Government Code, Section 53651.securities shall be collateralized by the actual security held in third-party safekeeping by the primary agent.

3. Repurchase Agreements. The Agency requires that Repurchase Agreements be collateralized only by securities authorized in accordance with California Government Code:
a. The securities which collateralize the repurchase agreement shall be priced at Market Value, including any Accrued Interest plus a margin. The Market Value of the securities that underlie a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities. b. Financial institutions shall mark the value of the collateral to market at least monthly and increase or decrease the collateral to satisfy the ratio requirement described above
a.c. The Agency shall receive monthly statements of collateral.

X. DIVERSIFICATION AND ELIGIBLE SECURITIES
The City will diversify investment instruments to avoid incurring unreasonable risks in overinvesting in specific instruments, individual financial institutions or maturities. The following portfolio maximums shall apply:

If the credit ratings of any security owned by the City are downgraded to a level below the quality required by this investment policy, it will be the City’s policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio.

If a security is downgraded, the Finance Director will use discretion in determining whether to sell or hold the security based on its current maturity, the economic outlook for the issuer, and other relevant factors.

If a decision is made to retain a downgraded security in the portfolio, its presence in the portfolio will be monitored and reported quarterly to the City Council.

City of Campbell, California
Investment Policy Date: September 53, 20243

13 Authorized Securities and Transactions Maximum Portfolio

CA. Gov’t.

Code
Section
Authorized Investment Maximum
Maturity
Authorized
Investment Limits -
% of Portfolio
Credit Rating Limit
53601 (a) City of Campbell Local Agency
Bonds 5 years None/10% Per
Issuer A/A-1 or Higher
53601 (c) State Obligations 5 years None/10% Per
Issuer A/A-1 or Higher
53601 (e) California Local Agencies 5 years None/10% Per Issuer A/A-1 or Higher
53601(b) United States Treasuries 5 years None None
53601(e) Federal Agency Securities 5 years 75% None
53601(e) Federal Instrumentality 5 years 75% None
53691(i) Repurchase Agreements 1 year 10% A-1/A

53601(g)

Prime Commercial Paper

270 days
25%
5% Per Issuer

A/A-1 or higher
53601(f) Eligible Bankers Acceptances 180 days 5% per issuer/30% Aggregate A-1/P-1/F-1
53601(j) Medium Term Notes 5 years 30%/ 5% per
issuer A/A-1 or Higher

53601(n)

Non-negotiable Certificates of
Deposit

5 years
25%
$1 million per
issuer

53601.8
(a)-(h)

Certificates of Deposit through
Account Registry Services

5 years
30% Aggregate
Maximum Up to
the FDIC Insured
Limit Per Issuer

-
16429.1 State of California LAIF N/A None -
53601(k) *Mutual Funds None 15% AAAm/Aaa/AAAV1+
53601(k) *Money Market Mutual Funds None 15% AAAm/Aaa/AAAV1+

53601(o)
Asset-Backed, Mortgage-Backed,
Mortgage Pass-Through
Securities, and Collateralized
Mortgage Obligations

5 years

20%/5% per issuer

AA or higher
53601(q) Supranationals 5 years 30% AA or higher
53601(p) Shares of a joint powers authority N/A None AAA or higher City of Campbell, California
Investment Policy Date: September 53, 20243

14 CA. Gov’t.

Code
Section
Authorized Investment Maximum
Maturity
Authorized
Investment Limits -
% of Portfolio
Credit Rating Limit
*Combined total not to exceed
20% per State

20%

City of Campbell, California
Investment Policy Date: September 53, 20243

15 EXHIBIT A

GLOSSARY
Asset Backed Securities. - Securities that are supported by pools of assets, such as installment loans or leases, or by pools of revolving lines of credits. Asset-backed securities are structured as trusts in order to perfect a security interest in the underlying assets.

Banker's Acceptance. This is a negotiable time draft (bill of exchange) with a maturity of six months or less drawn on and accepted by a commercial bank. Banker's Acceptances are usually created to finance the import and export of goods, the shipment of goods within the United States and storage of readily marketable commodities. Per State Law, cities may not invest more than 30% of idle cash in Banker's Acceptances.

Certificate of Deposit (CD's). - is a receipt for funds deposited in a bank or savings and loan association for a specified period of time at a specified rate of interest. The first $250,000 of a certificate of deposit is guaranteed by the Federal Deposit Insurance Corporation (FDIC). CD's with a face value in excess of $250,000 can be collateralized by Treasury Department Securities, which must be at least 110% of the face value of the CD's, in excess of the first $250,000, or by first mortgage loans which must be at least 150% of the face value of the CD balance in excess of the first $250,000.

Commercial Paper. - Notes are unsecured promissory notes of industrial corporations, utilities and bank holding companies. State law limits a city to investments in United States corporations having assets in excess of five hundred million dollars with an "A" or higher rating. Per State law, cities with less than $100 million in assets under management may not invest more than 25% of idle cash in commercial paper.

Delivery Versus Payment (DVP). - Delivery versus payment (DVP) is a securities industry settlement method that guarantees the transfer of securities only happens after payment has been made. DVP stipulates that the buyer's cash payment for securities must be made prior to or at the same time as the delivery of the security.

Local Agency Investment Fund (L.A.I.F.). - The L.A.I.F. was established by the state of California to enable treasurers to place funds in a pool for investments. There currently is a limitation of $75 million per agency subject to a maximum of 15 total transactions per month. The City of Campbell uses this fund when interest rates are declining as well as for short-term investments and liquidity.

Medium Term Notes. - are corporate or depository institution debt securities meeting certain minimum quality standards (as specified in the California Government Code) with a remaining maturity of five years or less.

Money Market Mutual Fund. - Mutual funds that invest solely in money market instruments (short- term debt instruments, such as Treasury bills, commercial paper, bankers' acceptances, repos and federal funds).

Mortgage Backed Securities. - Mortgage-backed securities (MBS) are created when a mortgagee or a purchaser of residential real estate mortgages creates a pool of mortgages and markets undivided interests or participations in the pool. MBS owners receive a prorata share of the interest and principal cash flows (net of fees) that are “passed through” from the pool of mortgages. MBS are complex securities whose cash flow is determined by the characteristics of the mortgages that are pooled together. Investors in MBS face prepayment risk associated with the option of the underlying mortgagors to pre-pay or payoff their mortgage. Most MBS are issued and/or guaranteed by federal City of Campbell, California
Investment Policy Date: September 53, 20243

16 agencies and instrumentalities (e.g., Government National Mortgage Association (GNMA), Federal National Mortgage Association (FNMA), and Federal Home Loan Mortgage Corporation (FHLMC)).

Mortgage Pass-Through Obligations. - Securities that are created when residential mortgages (or other mortgages) are pooled together and undivided interests or participations in the stream of revenues associated with the mortgages are sold.

Mutual Fund. - An investment company that pools money and can invest in a variety of securities, including fixed-income securities and money market instruments. Mutual funds are regulated by the Investment Company Act of 1940 and must abide by strict Securities and Exc hange Commission (SEC) disclosure guidelines.

Nationally Recognized Statistical Ratings Organization. - A nationally recognized statistical ratings organization (NRSRO) is a credit rating agency that provides an assessment of the creditworthiness of a firm or financial instrument(s) that is registered and approved by the Securities and Exchange Commission (SEC). Not all credit rating organizations are NRSROs Repurchase Agreements (REPOS). - is a contractual arrangement between a financial institution, or dealer, and an investor. This agreement normally can run for one or more days. The investor puts up his funds for a certain number of days at a stated yield. In return, he takes a given block of securities as collateral. At maturity, the securities are repurchased and the funds repaid plus interest.

Supranationals. - International institutions formed by two or more governments that transcend boundaries to pursue mutually beneficial economic or social goals. There are three supranational institutions that issue obligations that are eligible investments for California local agencies: the International Bank for Reconstruction and Development (IBRD), International Finance Corp oration (IFC), and InterAmerican Development Bank (IADB).

U.S. Treasury Bills. Commonly referred to as T-Bills, these are short-term marketable securities sold as obligations of the U.S. Government. T-Bills do not accrue interest but are sold at a discount to pay face value at maturity.

U.S. Treasury Notes. These are marketable, interest-bearing securities sold as obligations of the U.S. Government with original maturities of one to ten years. Interest is paid semi-annually.

U.S. Treasury Bonds . These are the same as U.S. Treasury Notes except they have original maturities of ten years or longer.

U.S. Government Agency Issues. Are securities that are unconditionally backed by the full faith and credit of the United States, including: Government National Mortgage Association (GNMA), Farmers Home Administration (FmHA),Small Business Administration (SBA), General Services Administration (GSA), Federal Housing Administration (FHA) and Housing and Urban Development (HUD).

U.S. Government Instrumentality Issues. Are government sponsored enterprises that are backed by the creditworthiness of the issuing agency, not the full faith and credit of the U.S. government. They do carry an implied guarantee of government assistance to the organization should it encounter financial difficulties. Issuers include: Federal National Mortgage Association (FNMA), Federal Home Loan Bank (FHLB), Federal Farm Credit Banks (FFCB) and Federal Home Loan Mortgage Corporation (FHLMC).

City of Campbell, California
Investment Policy Date: September 3, 2024

1. General Fund

2. Special Revenue Funds

3. Debt Service Funds

4. Capital Projects Funds

5. Internal Service Funds

6. Trust and Agency Funds
B. The policy does not cover funds held by the Public Employees Retirement System nor funds of the Deferred Compensation program.

D. The City shall ensure the safety of invested funds by limiting credit and interest rate risks. The three primary objectives of the City's Investment Policy in order of priority are:

City of Campbell, California
Investment Policy Date: September 3, 2024

2 1. Safety: Safety of principal is the foremost objective of the City of Campbell.

2. Liquidity: Liquidity is the second most important objective of the City's Policy.

IV. STRUCTURE AND RESPONSIBILITY
A. DELEGATION OF AUTHORITY:

B. POLICY REVIEW:

1. This Investment Policy shall be reviewed and approved annually as recommended by California Government Code Section 53600 et. seq.

C. RESPONSIBILITIES:

City of Campbell, California
Investment Policy Date: September 3, 2024

Such a transaction shall be reviewed, approved and verified in advance by the Finance Director, and shall be reported in the Quarterly Investment Report to Council.

D. Prudence:

E. Ethics and Conflicts of Interest:

Conflict with State Statutes or Regulations

1. In the instance of any conflict between the City of Campbell Investment Policy and Government Code Section 53600 et seq, the more stringent requirement shall apply.

The City has further restricted the eligible types of securities and transactions to the following:

1. United States Treasury bills, notes, bonds, or strips with a final maturity not exceeding five years from the date of purchase.

2. Federal Agency debentures and mortgage-backed securities with a final maturity not exceeding five years from the date of purchase issued by the Government National Mortgage Association (GNMA). The aggregate investment in Federal Agency obligations shall not exceed 75% of the City’s total portfolio. No more than 30% of the total portfolio may be invested in any single Agency issuer. No more than 20% of the total portfolio may be invested in callable agency securities.

4. Repurchase Agreements with a final termination date not exceeding one year collateralized by U.S. Treasury obligations, Federal Agency securities, or Federal Instrumentality securities listed in items 1, 2 and 3 above with the maturity of the collateral not exceeding five years. For the purpose of this section, the term collateral shall mean purchased securities under the terms of the City’s approved Master Repurchase Agreement. The purchased securities shall have a minimum market value including accrued in terest of 102% of the dollar value of the transaction. Collateral shall be held in the City's custodian bank, as safekeeping agent, and the market value of the collateral securities shall be marked-to-the-market daily. The aggregate investment in repurchase agreements shall not exceed 10% of the City’s total portfolio.

The Finance Director shall maintain a copy of the City's appro ved Master Repurchase Agreement along with a list of the broker/dealers that have executed a Master Repurchase Agreement with the City.

City of Campbell, California
Investment Policy Date: September 3, 2024

9. Certificates of Deposit at commercial bank, savings bank, or savings and loan association that uses a private sector entity (Certificate of Deposit Account Registry Service) that assists in the placement of certificates of deposit, provided that the purchase of certificates of deposit do not, in total, exceed 30% of the City’s funds that may be invested for this purpose. The City shall choose a nationally or state chartered commercial bank in California as the “selected” depository institution to invest the funds . The selected depository institution may submit the funds to a CDARS for the benefit of the City’s account.

The full amount of the principal and interest that may be accrued during the maximum term of each certificate shall be insured by the FDIC. The maximum maturity does not exceed 5 years

10. Negotiable Certificates of Deposit (NCDs) issued by a nationally or state -chartered bank, a savings association or a federal association, a state or federal credit union, or by a federally licensed or state-licensed branch of a foreign bank, provided that the purchase of City of Campbell, California
Investment Policy Date: September 3, 2024

11. State of California’s Local Agency Investment Fund (LAIF) , pursuant to California Government Code Section 16429.1.

12. Mutual Funds registered under the Investment Company Act of 1940 that (1) are “no-load” (meaning no commission or fee shall be charged on purchases or sales of shares); (2) invest only in the securities and obligations authorized in this policy and (3) have a rating of AAA by Standard and Poor's, Aaa by Moody's or AAA/V1+ by Fitch. No more than 10% of the City’s total portfolio may be invested in mutual funds of any one issuer, and the aggregate investment in mutual funds shall not exceed 10% of the City’s total portfolio. The combined aggregate investment in mutual funds and money market funds shall not exceed 20% of the total portfolio.

13. Money Market Mutual Funds registered under the Investment Company Act of 1940 that (1) are “no-load” (meaning no commission or fee shall be charged on purchases or sales of shares); (2) have a constant daily net asset value per share of $1.00; (3) invest only in the securities and obligations authorized in this policy and (4) have a rating of at least two of the following: AAA by Standard and Poor's, Aaa by Moody's or AAA/V1+ by Fitch. No more than 20% of the City’s total portfolio may be invested in the shares of any on money market fund, and the combined aggregate investment in mutual funds and money market funds shall not exceed 20% of the total portfolio.

14. Municipal and State Obligations with a minimum long -term rating of A/A -1 or higher by Standard and Poor’s and not exceeding 30% of the portfolio and the maximum maturity does not exceed 5 years:
(a) Bonds Issued by the Local Agency (City of Campbell) including bonds payable solely out of the revenue from a revenue-producing property owned, controlled, or operated by the local agency or by a department, board, agency, or authority of the local agency.) (b) State Obligations including registered treasury notes or bonds of this State and any of the other 49 states in addition to California, including bonds payable solely out of the revenue from a revenue-producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of the any of the other 49 United States, in addition to California.
(c) California Local Agency obligations including bonds, notes, warrants, or other evidence of indebtedness of any local agency within this state, including bonds payable solely out of the revenue from a revenue-producing property owned, controlled, or operated by the local agency or by a department, board, agency, or authority of the any of the local agency.
(d) No more than 5% of the portfolio may be invested in any single issuer.

15. Asset-Backed, Mortgage -Backed, Mortgage Pass -Through Securities, and Collateralized Mortgage Obligations from Issuers Not Defined in sections 1, 2 and 3 of the Authorized Securities and Transactions Section of This Policy, provided that:

City of Campbell, California
Investment Policy Date: September 3, 2024

9 (a) The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
(b) No more than 20% of the total portfolio may be invested in these securities. (c) No more than 5% of the portfolio may be invested in any single Asset-Backed security issuer.
(d) The maximum legal final maturity does not exceed five (5) years.

16. Supranationals, provided that:
(a) Issues are US dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter -American Development Bank.
(b) The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
(c) No more than 30% of the total portfolio may be invested in these securities. (d) No more than 10% of the portfolio may be invested in any single issuer. (e) The maximum maturity does not exceed five (5) years.

It is the intent of the City that the foregoing list of authorized securities and transactions is strictly interpreted. Any deviation from this list must be preapproved by the City Council writing.

17. Shares of Beneficial Interest Issued by a Joint Powers Authority (JPA) organized pursuant to Section 6509.7 that invests in the securities and obligations authorized in subdivisions (a) to (q), inclusive. Each share shall represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority and be rated AAA or equivalent. To be eligible under this section, the joint powers authority issuing the shares shall have retained an investment adviser that meets all of the following criteria:
(a) The adviser is registered or exempt from registration with the Securities and Exchange Commission.
(b) The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (q), inclusive. (c) The adviser has assets under management in excess of five hundred million dollars ($500,000,000).

18. Prohibited Investment Vehicles and Practices
a. State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options. b. In accordance with Government Code, Section 53601.6, investment in inverse floaters, range notes, or mortgage derived interest-only strips is prohibited. c. Investment in any security that could result in a zero interest accrual if held to maturity is prohibited. Under a provision sunsetting on January 1, 2026, securities backed by the U.S. Government that could result in a zero- or negative-interest accrual if held to maturity are permitted.
d. Purchasing or selling securities on margin is prohibited. e. The purchase of foreign currency denominated securities is prohibited. f. Agencies that are not Qualified Institutional Buyers (QIB) as defined by the Securities and Exchange Commission are prohibited from purchasing Private Placement Securities. The SEC defines a QIB as having at least $100,000,000 in securities owned and invested.
g. The purchase of a security with a forward settlement date exceeding 45 days from the time of investment is prohibited.

City of Campbell, California
Investment Policy Date: September 3, 2024

10 VI. PORTFOLIO MATURITIES AND LIQUIDITY
To the extent possible, investments shall be matched with anticipated cash flow requirements and known future liabilities. The City will not invest in securities maturing more than five years from the date of settlement, unless the City Council has granted authority to make such an investment at least three months prior to the date of investment. The duration of the portfolio will generally be approximately equal to the duration (typically, plus or minus 20%) of a Market Benchmark, an index selected by the City based on the City’s investment objectives, constraints and risk tolerances.

VII. MONITORING AND REPORTING
A. The Finance Director shall routinely monitor the contents of the portfolio and shall file with the City Council the Assistant Finance Director's Investment Report at the first regularly scheduled City Council meeting after 45 days from the end of the quarter. The reports shall be prepared and submitted in accordance with California Government Code Section 53646 and shall include the following on all invested monies:
➢ Type of Investment and Issuer
➢ Beginning Balances
➢ Purchases During Quarter
➢ Monthly transactions including all Maturities and Sales During the Quarter ➢ Ending Balances
➢ Maturity Date
➢ Weighted Average Final Maturity
➢ Call Provisions (if any)
➢ Interest Rate
➢ Weighted Average Yield
➢ Face Value or Purchase Cost
➢ Market Value including source
➢ Interest Earned During Quarter
➢ Interest Earned to Maturity
➢ Cash Flow Projection for the Following Quarter
➢ Summary of Cash Invested to Total Cash Balances
➢ Comparative Statistics by Fiscal Year
➢ Reconciliation of Cash & Investments to General Ledger Balances ➢ Investments under the Management of Contracted Parties ➢ Statement of Compliance with the Investment Policy
➢ Statement of Ability to Meet Obligations of Next Six Months VIII. SELECTION OF BROKER/DEALERS
The City shall transact business with securities broker/dealers after careful review of their qualifications and creditworthiness. In selecting broker /dealers, the Finance Director or designated staff member shall select broker/dealers representing primary dealers in government securities that have established offices and order desks within the State of California, or with such firms that have a primary dealer within their holding company structure.

City of Campbell, California
Investment Policy Date: September 3, 2024

11 Before accepting funds or engaging in investment transactions with the City, the supervising officer at each authorized broker/dealer shall submit and annually update a City approved Broker/Dealer Information Request form that includes the firm’s most rece nt audited financial statement. The Finance Director, or his or her designee, shall maintain a list of approved broker/dealers. Broker/dealers shall attest in writing that they have received and reviewed a copy of this Investment Policy, and that they will comply with it and disclose potential conflicts or risks to public funds that might arise out of business transactions between the firm and the City of Campbell. If the City has engaged the services of an outside professional investment advisor, the investment advisor may use its own list of authorized broker -dealers to conduct transactions on behalf of the City.

IX. DELIVERY, SAFEKEEPING AND COLLATERALIZATION
A. Delivery:

1. All investment transactions shall be conducted on a delivery-versus-payment (DVP) basis.

B. Safekeeping:

C. Collateralization:

1. Certificates of Deposit (CDs). The Agency shall require any commercial bank or savings and loan association to deposit eligible securities with an agency of a depository approved by the State Banking Department to secure any uninsured portion of a Non-Negotiable Certificate of Deposit. The value of eligible securities as defined pursuant to California Government Code, Section 53651, pledged against a Certificate of Deposit shall be equal to 150% of the face value of the CD if the securities are classified a s mortgages and 110% of the face value of the CD for all other classes of security.

2. Collateralization of Bank Deposits. This is the process by which a bank or financial institution pledges securities, or other deposits for the purpose of securing repayment of deposited funds. The Agency shall require any bank or financial institution to c omply with the collateralization criteria defined in California Government Code, Section 53651.

12 Value of the securities that underlie a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities. b. Financial institutions shall mark the value of the collateral to market at least monthly and increase or decrease the collateral to satisfy the ratio requirement described above
c. The Agency shall receive monthly statements of collateral.

If a decision is made to retain a downgraded security in the portfolio, its presence in the portfolio will be monitored and reported quarterly to the City Council.

City of Campbell, California
Investment Policy Date: September 3, 2024

13 EXHIBIT A

Mortgage Backed Securities. - Mortgage-backed securities (MBS) are created when a mortgagee or a purchaser of residential real estate mortgages creates a pool of mortgages and markets undivided interests or participations in the pool. MBS owners receive a prorata share of the interest and principal cash flows (net of fees) that are “passed through” from the pool of mortgages. MBS are complex securities whose cash flow is determined by the characteristics of the mortgages that are pooled together. Investors in MBS fa ce prepayment risk associated with the option of the underlying mortgagors to pre-pay or payoff their mortgage. Most MBS are issued and/or guaranteed by federal City of Campbell, California
Investment Policy Date: September 3, 2024

14 agencies and instrumentalities (e.g., Government National Mortgage Association (GNMA), Federal National Mortgage Association (FNMA), and Federal Home Loan Mortgage Corporation (FHLMC)).

Supranationals. - International institutions formed by two or more governments that transcend boundaries to pursue mutually beneficial economic or social goals. There are three supranational institutions that issue obligations that are eligible investments for California local agencies: the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), and InterAmerican Development Bank (IADB).

U.S. Treasury Notes. These are marketable, interest-bearing securities sold as obligations of the U.S. Government with original maturities of one to ten years. Interest is paid semi-annually.

U.S. Treasury Bonds . These are the same as U.S. Treasury Notes except they have original maturities of ten years or longer.

U.S. Government Agency Issues. Are securities that are unconditionally backed by the full faith and credit of the United States, including: Government National Mortgage Association (GNMA), Farmers Home Administration (FmHA), Small Business Administration (SBA), General Services Administration (GSA), Federal Housing Administration (FHA) and Housing and Urban Development (HUD).

To: Finance Sub-Committee

Date: August 26, 2024
From: Will Fuentes, Finance Director

Subject: Investment Strategy for FY 2024-25

BACKGROUND

The Investment Policy establishes procedures and guidelines by which the City’s surplus funds can be managed in a prudent and fiscally sound manner. The policy encompasses those funds over which the City exercises fiscal control and prioritizes the objectives of public funds management as safety, liquidity and yield, in that order and consistent with guidance provided by the Government Finance Officers Association (GFOA). It also stipulates allowable and unallowable investment alternatives as well as establishes parameters for selecting broker/dealers and institutions with which the City may do business.

California Government Code Section 53646 (a) (2) recommends that on an annual basis, the City Investment Policy be submitted to its legislative body and any oversight committee for consideration at a public meeting. The Finance S ub-Committee is the oversight committee responsible for review of the Investment Policy. In addition to review of any proposed revisions to the Investment Policy, staff and the City’s new investment advisors (Chandler) have prepared a report summarizing the past year’s economic conditions and the recommended Investment Strategy for managing the City’s available invested funds in FY 2024-25.

INVESTMENT OBJECTIVES AND OVERVIEW
The City’s policy is to invest public funds in a prudent manner, provide for maximum security while meeting daily cash flow needs and comply with applicable statutes. Chief among the objectives outlined in the Investment Policy are safety, liquidity and return , in that specific order and again consistent with GFOA guidance. Within this framework , a number of investment choices are provided to allow flexibility in meeting these objectives. The City and its investment advisors continue to take a conservativ e approach with its investments and that is reflected in the currently recommended investment policy.

As a means to implement the policy, it is important to develop a strategy for achieving the stated objectives. Likewise, the strategy should be reviewed periodically to determine whether it needs to be modified in light of changing economic and financial conditions. This document will serve as the City’s investment strategy for the next year (FY 2024-25) and will be reviewed annually in conjunction with the review of the City’s Investment Policy or sooner if conditions warrant.

CITY OF CAMPBELL MEMORANDUM
Finance Department

Investment Strategy FY 2024-25

Page 2 ends

SUMMARY OF CURRENT STRATEGY AND RECOMMENDATIONS
As the Finance Sub-Committee may recall, the City went through a competitive RFP process last fiscal year and selected Chandler Asset Management to assist with the investment of City funds. As part of the agreement with Chandler, City staff will continue to manage liquid funds to meet near -term expenditures and Chandler will manage longer -term funds not needed for immediate use. Chandler though will provide expertise and support to City staff as needed regarding the optimal investment of near-term liquid funds.

In regard to Investment Strategy for FY 2024-25, Chandler and City staff recently conducted a benchmark study to determine a benchmark that would capture the City's appropriate risk tolerance and serve as a comparison for performance over time. Given this study, City staff and Chandler recommend the selection of the ICE Bank of America Merrill Lynch 1- 5 Year US Treasury and Agency Index as its target benchmark to invest funds and to evaluate Chandler’s performance against. Chandler will invest funds in accordance with the City's Investment Policy, and based on market conditions, seek to maximize return in comparison to the selected benchmark while also prioritizing safety and liquidity.

As of July 31, 2024, Chandler and the City have completed operational requirements of the on-boarding process; with Chandler managing approximately $18.85 million of City funds as of that date. G iven funds not needed for near -term operational needs and the maturity of several other longer -term investment, t he City transferred another $5.0 million into its Chandler managed portfolio in early August 2024. The City will contribute additional funds into its Chandler managed portfolio as staff identifies future funds not needed for near-term operational expenditures. As in the past, staff continues to recommend that the City maintain sufficient liquidity to cover daily operating cash flows for a minim um of 3 months to provide a reasonable cushion for fluctuations in the portfolio balance and for unforeseen emergencies. Average monthly disbursements over the last fiscal year (FY 202 3-24) were approximately $8.0 million. Therefore, staff recommends retaining a target of $24.0 million (3 months) in the Local Agency Investment Fund (LAIF) or similar secure, stable, and liquid pooled investment funds as allowed by the City’s Investment Policy . Please note that as of June 30, 2024, the City had $78.9 million invested in LAIF, with an annual return of 3.93%.

This compares with $75.0 million invested in LAIF as of June 30, 2023 and an annual LAIF return of 2.17% at that time.

Through the end of FY 2024- 25 and given recommendations above, Chandler will position the portfolio relative to the benchmark duration, diversify across sectors, position maturities along the yield curve and perform credit oversight of all the City's investment positions.

ECONOMIC UPDATE AND OUTLOOOK
Shown as Attachment A and as of August 12, 2024, Chandler has prepared a comprehensive Economic Update which covers the following topics on a national level:
• Significant Economic Highlights
• Employment
• Job Openings & Labor Turnover
• Inflation
• Consumer Spending and Confidence
Investment Strategy FY 2024-25

Page 3 ends

• Leading Economic Indicators
• Housing
• Manufacturing
• Gross Domestic Product (GDP)
• Federal Reserve
• Bond Yields
Additionally, as it relates to employment in California, the state gained 21,100 nonfarm payroll jobs in July 2024. Statewide unemployment remained stable at 5.2%; unchanged from June 2024, but up from 4.7% in July 2023. In Santa Clara County, the unemployment rate increased to 4.4% in July 2024; up from 4.1% in June 2024 and 3.7% in July 2023. And in Campbell, the unemployment rate increased to 3.9% in July 2024; up from 3.7% in June 2024 and 3.2% in Ju ly 2023 . At its pandemic high point in April 2020, the Campbell unemployment rate had reached 11.2%.

PORTFOLIO BALANCE
For the fiscal year ended June 30, 20 24, the City’s portfolio balance was approximately $95.59 million and was comprised of approximately $78.9 million (82.27%) in LAIF, $16.0 million (16.68%) in US Government Agency securities, and $1.0 million ( 1.04) in corporate notes or money market accounts. The weighted average yield for the fiscal year was 3.79%.

This compares to a portfolio balance of $95.5 million and a weighted average yield of 2.25% for fiscal year ended June 30, 2023. The higher FY 2024 yield was the result of both higher fixed income investment returns and higher LAIF returns . Almost all these funds are considered “discretionary” investments meaning that the City can invest this amount as it sees fit within the guidelines of the Investment Policy.

RECOMMENDATION
It is recommended that the Finance sub -Committee approve the proposed strategy for FY 2024-25.

Distribution:

Anne Bybee, Vice Mayor
Sergio Lopez, Council Member
Brian Loventhal, City Manager
Angelique Gaeta, Assistant City Manager

ECONOMIC
UPDATE
A UGUST 12, 2024

ATTACHMENT A
3 Section 1 | Economic Update

ATTACHMENT A
Economic Update



Recent economic data suggests positive but slower growth this year fueled by consumer spending. While the consumer has been resilient, growing credit card debt, higher delinquencies, and a moderating labor market pose potential headwinds to future economic growth.

Inflationary trends are subsiding, but core levels remain above the Fed’s target. The labor market is showing marked signs of cooling, reflecting an improved balance between supply and demand for workers. Given the cumulative effects of restrictive monetary policy and tighter financial conditions, we believe the economy will gradually soften and the Fed begin lowering interest rates at upcoming meetings with pace and magnitude determined by the incoming data.

As expected at the July meeting, the Federal Open Market Committee voted unanimously to leave the federal funds rate unchanged at a target range of 5.25-5.50%. Although this was the eighth straight meeting they left the overnight rate unchanged, they noted that risks to achieving their employment and inflation goals are moving “into better balance”. In addition, the FOMC adjusted their evaluation of the labor market pointing out that job gains have moderated. The market is now pricing in more aggressive easing in the coming months.

The US Treasury yield curve shifted significantly lower in July as economic data moderated. The 2-year Treasury yield fell 50 basis points to

4.26%, the 5-year Treasury dropped 46 basis points to 3.91%, and the 10-year Treasury yield declined 37 basis points to 4.03%. The inversion between the 2-year Treasury yield and 10-year Treasury yield narrowed to -23 basis points at July month-end versus -36 basis points at June month-end. The spread between the 2-year Treasury and 10-year Treasury yield one year ago was -92 basis points. The inversion between 3-month and 10-year Treasuries widened to -126 basis points in July from -96 basis points in June.

ATTACHMENT A
Employment
-400
-200
0 200
400
600
800
1,000MOM Change In Thousands (000's)
Nonfarm Payroll (000's)
Non-farm Payroll (000's)
3-month average (000's)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%
Unemployment Rate
Underemployment Rate (U6)
Unemployment Rate (U3)
Rate (%)
The U.S. economy added 114,000 jobs in July, significantly below expectations of 175,000. Additionally, the prior two months were revised down by 29,000. The three-month moving average and six-month moving average payrolls have weakened from the first quarter to 170,000 and 194,000 respectively. The unemploymentrate increased to 4.3% in July, and the labor participation rate inched up to 62.7%, remaining below the pre-pandemic level of 63.3%. The U-6 underemploymentrate, which includes those who are marginally attached to the labor force and employed part time for economic reasons rose to 7.8% from 7.4%. Average hourly earnings rose 3.6% year-over-year in July, down from 3.8% year-over-year in June. The labor markets continue to show signs of cooling, in line with the Federal Reserve’s view that there has been “substantial” progress towards better balance in the labor market between demand and supply for workers.

Source: US Department of Labor Source: US Department of Labor

ATTACHMENT A
Job Openings & Labor Turnover Survey
0 2,000
4,000
6,000
8,000
10,000
12,000
14,000
Job Openings
Recession
Historical Average
In Thousands (000's)
The Labor D epartment’s Job Openings and Labor TurnoverSurvey (JOLTS) decreased to 8.18 million job openings in June from an upwardly revised 8.23 million in May. Job openings still represent a healthy ratio of around 1.2 jobs for each unemployed individual. The quits rate, an indicator of job availability, came in at 2.1%, which is the lowest level since 2020. While the current level of job openings remains elevated from a historical perspective, the trend is decelerating.

Source: US Department of Labor

ATTACHMENT A
Inflation

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%
Consumer Price Index (CPI)
CPI YOY % Change
Core CPI YOY % Change
YOY (%) Change

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%
Personal Consumption Expenditures (PCE)
PCE Price Deflator YOY % Change
PCE Cor e Deflator Y OY % Change
Fed Target
YOY (%) Change
In June, t he Consumer Price Index (CPI) declined 0.1% month-over-monthand rose 3.0% year-over-year, reflecting broad-based cost reductions. The month-over-monthdrop was the first deflationary data point since the pandemic. The Core CPI, which excludes volatile food and energy components, was up just 0.1% month-over-monthand 3.3% year-over-year in June, down from 3.4% in May and lower than expected. The Personal Consumption Expenditures (PCE) Index rose 0.1% from the previous monthand 2.5% year-over-year in June.

The Core PCE deflator (the Fed’s preferredgauge) increased 0.2% month-over-monthand 2.6% over the past year, still above the Fed’s 2% inflation target. Much of the lingering inflation has been driven by shelter costs and demand for services, but recent data provide confirmation that inflation is moderating.

Source: US Department of Labor Source: US Department of Commerce

ATTACHMENT A
Consumer
-30.0%
-20.0%
-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%
Retail Sales YOY % Change
YOY (%) Change
Retail Sales w ere unchanged month-over-monthin June after an upwardly revised 0.3% gain in May. On a year-over-year basis, Retail Sales growth further slowed to 2.3% in June from 2.6% in May. Nonstore retailers were a bright spot in June, while motor vehicle and gasoline sales declined. The Conference Board’s Consumer Confidence Index rose to 100.3 in July, up from June’s downwardly revised

97.8 reading. While the present situation component declined, future expectations for the labor market improved. While the consumer has been resilient, consumption has begun to moderate in the face of higher interest rates, rising credit card balances, and growing delinquencies.
0 20
40 60
80 100
120
140
160
Index Level
Consumer Confidence
Recession
Source: US Department of Commerce Source: The Conference Board All time high is 144.70 (1/31/00); All time low is 25.30 (2/28/09)

ATTACHMENT A
Leading Indicators of Economic Activity
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%

0.0%

5.0%

10.0%

15.0%
Leading Economic Indicators (LEI)
Recession
YOY (%) Change
-1.00
-0.75
-0.50
-0.25

0.00 0.25

0.50 0.75

1.00 Chicago Fed National Activity Index (CFNAI)
Recession
3 Month Average
The Conference B oard’s Leading Economic Index (LEI) fell 0.2% in June following a 0.4% decline in May. The index dropped 4.8% year-over- year. The report stated that "due to the smaller month-on-monthrate of decline, the LEI's long-term growth has become less negative, pointing to a slow recovery.” The Chicago Fed National Activity Index (CFNAI) decreased to 0.05 in June from 0.23 in May, surpassing consensus expectations. The three-month moving average rose to -0.01 in June from -0.08 in May, indicating slightly below-trend growth expectations for the economy.

Source: The Conference Board Source: Federal Reserve Bank of Chicago

ATTACHMENT A
Housing
0 200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
In Thousands of Units
Annualized Housing Starts
Multi Family Housing Starts
Single Family Housing Starts
Housing starts jumped 3.0% month-over-monthin June to a higher-than-expected 1.353 million units, driven primarily by the multi-family category. Starts were down 4.4% year-over-year. The Freddie Mac average rate for a 30-year fixed mortgage edged down to 6.85% in July from 6.92% in June. According to the Case-Shiller 20-City Home Price Index, housing prices rose 6.8% year-over-year in May, decelerating from 7.3% reported in the previous month. Tight inventories and higher mortgage rates continue to impact affordability.

Source: US Department of Commerce Source: S&P
-20.0%
-16.0%
-12.0%
-8.0%
-4.0%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

24.0%
S&P/Case-Shiller 20 City Composite Home Price Index
Recession
YOY (%) Change

ATTACHMENT A
Survey Based Measures
40 45
50 55
60 65
70 Institute of Supply Management (ISM) Surveys
ISM Manufacturing ISM Services

EXPANDING

CONTRACTING
The Institute for Supply Management (ISM) Manufacturing index declined to a lower than expected 46.8 in July from 48.5 in June. New orders were weak, and staff reductions increased. The ISM Services Index rebounded to 51.4 in July after falling unexpectedly to 48.8 in June. The survey reflected a return to growth in production, new orders and employment in July. A reading over 50 indicates expansion, while a reading under 50 indicates contraction.

Source: Institute for Supply Management

ATTACHMENT A
Gross Domestic Product (GDP)
Components of GDP 9/23 12/ 23 3/24 6/24

2.1% 2.2% 1.0% 1.6%

1.7% 0.2% 0.8% 1.5%

0.0% 0.3% -0.7% -0.7%

0.5% 0.2% 0.0% 0.3%

0.5% 0.6% 0.3% 0.3%

4.9% 3.4% 1.4% 2.8%
State and Local (Consumption and Gross
Investment)
Personal Consumption Expenditures
Gross Private Domestic Investment
Net Exports and Imports
Federal Government Expenditures
Total
-40.0%
-30.0%
-20.0%
-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%
Gross Domestic Product (GDP)
GDP QOQ % Change
GDP YOY % Change
Source: US Department of Commerce Source: US Department of Commerce The advance e stimate for second quarter GDP came in higher than expected at 2.8%, beating consensus expectations and 1.4% growth in the first quarter. Personal consumption was the largest contributor to GDP, mostly due to outlays for necessities such as health care, housing, and utilities. The strong reading was also driven by business capital investment and an increase in auto inventories as car dealerships grappled with a software cyberattack. The consensus projection calls for 1.5% growth in the third quarter and 2.3% growth for the full year 2024.

ATTACHMENT A
Federal Reserve
Source: Federal Reserve Source: Bloomberg
0 1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
Federal Reserve Balance Sheet Assets
Recession
In $ millions
As expected at the July meeting, the Federal Open Market Committee voted unanimously to leave the federal funds rate unchanged at a target range of 5.25-5.50%. Although this was the eighth straight meeting they left the overnight rate unchanged, they noted that risks to achieving their employment and inflation goals are moving “into better balance”. In addition, the FOMC adjusted their evaluation of the labor market pointing out that job gains have moderated. The Fed continues to reduce its holdings of U.S. Treasury securities and agency mortgage-backed securities as per its predefined schedule of $25 billion and $35 billion per month. Since the Fed began its Quantitative Tightening campaign in June 2022, securities holdings have declined by approximately $1.7T to approximately $7.3T.

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%
Effective Federal Funds Rate
Recession
Yield (%)

ATTACHMENT A
Bond Yields
Source: Bloomberg Source: Bloomberg

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%
US Treasury Note Yields
2-Year
5-Year
10-Year
Yield (%)

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%
US Treasury Yield Curve
Jul-24
Apr-24
Jul-23
Yield (%)
At the end of July, the 2-year Treasury yield was 62 basis points lower, and the 10-Year Treasury yield was 7 basis points higher, year- over-year. The inversion between the 2-year Treasury yield and 10-year Treasury yield narrowed to -23 basis points at July month-end versus -36 basis points at June month-end. The inversion has occurred since July 2022 and remains historically long. The average historical spread (since 2003) is about +130 basis points. The inversion between 3-month and 10-year Treasuries widened to -126 basis points in July from -96 basis points in June.

ATTACHMENT A
Disclosures
2024 Chandler Asset Management, Inc., An independent Registered Investment Adviser This report is provided for informational purposes only and should not be construed as specific investment or legal advice. The information contained herein was obtained from sources believed to be reliable as of the date of publication but may become outdated or superseded at any time without notice. Any opinions or views expressed are based on current market conditions and are subject to change. This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied upon as indicator of future results. Past performance is not indicative of future results. This report is no intended to constitute an offer, solicitation, recommendation or advice regarding any securities or investment strategy and should not be regarded by recipients as a substitute for the exercise of their own judgment.

Fixed income investments are subject to interest, credit and market risk. Interest risk: the value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low rated bonds generally must pay higher interest rates to attract investors willing to take on greater risk. Market risk: the bond market in general could decline due to economic conditions, especially during periods of rising interest rates.

ATTACHMENT A

City Council SubcommitteeAugust 26, 2024

City Council Subcommittee
August 26, 2024