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A Division of U.S. Bancorp Asset Management, Inc.
For Institutional Investor or Investment Professional Use Only – This material is not for inspection by, distribution to, or quotation to the general public City of Hayward
Investment Update
November 20, 2024
Justin Resuello, Institutional Sales and Relationship Manager
ATTACHMENT II
• The U.S. economy is characterized by:
• A labor market that is in better balance and supports consumer activity • Inflation that has made meaningful progress towards the Federal Reserve’s (Fed) 2% target
• Resilient economic growth and consumer spending that support the ‘soft landing’ scenario
• The Federal Reserve began their easing cycle
• The Fed cut the federal funds target rate by 50 basis points (bps) to 4.75% -
5.00% at its September FOMC meeting
• Fed officials noted they have gained greater confidence the risks to their dual mandate are “roughly” in balance
• Treasury yields peaked in October 2023
• After peaking in October 2023, yields have trended lower • The yield curve began to disinvert in the most recent quarter as the spread between the 2-year and 10-year Treasury reached positive territory for the first time in over 2 years
Market Themes
1Source: Details on market themes and economic indicators provided throughout the body of the presentation. Bloomberg Finance L.P., as of September 30, 2024.
Labor Market Moves Into Better Balance and
Inflation Trends Lower
2Source: Bureau of Labor Statistics and Bloomberg Finance L.P., as of September 2024. Data is seasonally adjusted.
Sept-24
254
0 100
200
300
400
500
Sep-22 Sep-23 Sep-24
Thousands
Monthly Change In Nonfarm Payrolls
Nonfarm Payrolls
3-month Moving Average
Sept-24
4.1%
0%
1%
2%
3%
4%
5%
Sep-22 Sep-23 Sep-24
Unemployment Rate
Sep-24
2.4%
Sep-24
3.3%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Sep-22 Mar-23 Sep-23 Mar-24 Sep-24
Consumer Price Index (CPI)
Year-Over-Year Changes
CPI (YoY) Core CPI (YoY) Fed Target
Interest Rate Update
Source: Bloomberg Finance L.P., as of September 30, 2024. 0%
1%
2%
3%
4%
5%
6%
U.S. Treasury Yield Curve
September 30, 2023
September 30, 2024
0%
1%
2%
3%
4%
5%
6%
2-Year Treasury Yield
September 2019-September 2024
3 Hayward’s Investment Objectives
City of Hayward Statement of Investment Policy.
Safety
➢High quality
investments
➢Management of
credit and market
risk
Liquidity
➢Cash flow
coordination with
the staff
➢Allocation to
overnight funds
Yield
➢Duration
management
➢Active trading and
continual
evaluation of
relative value
among allowable
sectors
Diversification
➢Diversification by
sector, issuer, and
maturity
4 Overview of The City’s PFMAM-Managed Funds
As of September 30, 2024. 5
Market Value Average
Duration Yield at Cost Yield at
Market
City of Hayward Portfolio $230,657,909 2.54 years 3.57% 3.83% Short-Term Portfolio $49,613,614 0.53 years 4.95% 4.57% Combined $280,271,523 2.22 years 3.79% 3.95%
2%
17%
23%
18%
21%
19%
$0
$10
$20
$30
$40
$50
$60
$70
Overnight 0-1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years Millions
Maturity Distribution
Short-Term Portfolio Medium-Term Portfolio
Overview of The City’s PFMAM-Managed Funds
6 Ratings by Standard & Poor’s as of September 30, 2024. Securities in the City's portfolio are in compliance with California Government Code and the City's investment policy.
Sector Allocation
U.S. Treasury 63%
Agency CMBS 10%
Municipal 3%
Corporate 17%
Asset-Backed 4%
Negotiable CD <1%
CAMP Pool 2%
Credit Quality
AAAm 2%
AA 78%
A 12%
A-1+ <1%
NR 2%
BBB+ 1%
AAA 4%
➢ The portfolio is well diversified and comprises securities of high credit quality.
Total Return Performance
As of September 30, 2024
• Performance on a trade-date basis, gross (i.e., before fees). • LGIP and cash excluded from performance calculations. • Past performance is not indicative of future returns. Quarterly returns are presented on an unannualized basis. Returns for periods greater than one year are presented on an annualized basis.
• Since inception date September 30, 2012. The portfolio’s benchmark is currently the ICE BofAML 1-5 Year U.S. Treasury Index. Prior to 12/31/21 it was the ICE BofAML 1-3 Year U.S. Treasury Index. Source: Bloomberg.
City of Hayward Portfolio Performance
3Q24 3.39%
Past 1 Year 7.75%
Since Inception 1.32%
0%
2%
4%
6%
8%
1 Year 3 Year 5 Year 10 Year Since Inception
Historical Performance
Portfolio Performance Benchmark
7 Outlook
8 OUTLOOK
► The Fed’s path is less certain, but further
easing is expected in the coming year.
► Inflation continues to make progress toward
the Fed’s 2% target although shelter costs
remain a headwind.
► Labor market reached better balance and
supports consumer activity.
► U.S. consumer spending continues to
support the “soft landing” scenario.
RISKS TO OUTLOOK
► Risks to achieving the Fed’s employment
and inflation goals are now “roughly in
balance.”
► Continued elevated geopolitical risks,
including Ukraine, Israel, China.
PORTFOLIO STRATEGY
► Increasing the portfolio’s diversification has
aided portfolio performance and we will
maintain broad diversification by sector,
industry, and issuer.
► Continue to evaluate all opportunities as we
seek to safely add value to the City’s
portfolios.
► Maintain a strong sense of safety and risk
management.
Disclaimer
Disclaimer
The views expressed within this material constitute the perspective and judgment of U.S. Bancorp Asset Management, Inc. at the time of distribution and are subject to change. Any forecast, projection, or prediction of the market, the economy, economic trends, and equity or fixed-income markets are based upon current opinion as of the date of issue and are also subject to change. Opinions and data presented are not necessarily indicative of future events or expected performance. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. No representation is made as to its accuracy or completeness.
PFM Asset Management serves clients in the public sector and is a division of U.S. Bancorp Asset Management, Inc., which is the legal entity providing investment advisory services. U.S. Bancorp Asset Management, Inc. is a registered investment adviser, a direct subsidiary of U.S. Bank N.A. and an indirect subsidiary of U.S. Bancorp. U.S. Bank N.A. is not responsible for and does not guarantee the products, services, or performance of U.S. Bancorp Asset Management, Inc.
NOT FDIC INSURED : NO BANK GUARANTEE : MAY LOSE VALUE 9