INVESTMENT REPORT
City of South San Francisco | As of June 30, 2025
CHANDLER ASSET MANAGEMENT | chandlerasset.com
Chandler Team:
For questions about your account, please call (800) 317-4747, or contact [email protected]
Information contained herein is confidential. We urge you to compare this statement to the one you receive from your qualified custodian. Please see Important Disclosures at the end of the statement.
Recent economic data suggest slower growth in 2025 and greater market uncertainty as the effects of fiscal policy unfold. Inflationary trends have subsided, but some components remain sticky, and core levels remain above the Fed’s target. The labor market reflects improved balance between supply and demand for workers. While job creation has been robust, continuing jobless claims remain elevated.
Given the economic outlook, we expect gradual normalization of monetary policy and a steepening yield curve.
As broadly anticipated, the Federal Open Market Committee (FOMC) left the Federal Funds Rate unchanged at the range of 4.25 - 4.50% at the June meeting. Fed Chair Powell continued to emphasize the Committee’s “wait and see” approach amidst economic uncertainty that remains elevated but diminished. Federal Reserve officials continued to pencil in two rate cuts in 2025.
US Treasury yields declined in June. The 2-year Treasury yield fell 18 basis points to 3.72%, the 5-year Treasury dropped 17 basis points to
3.80%, and the 10-year Treasury yield also declined 17 basis points to 4.23%. The spread between the 2-year and 10-year Treasury yield points on the curve edged up to +51 basis points at June month-end versus +50 basis points at May month-end. The spread between the 2- year Treasury and 10-year Treasury yield one year ago was -36 basis points. The spread between the 3-month and 10-year Treasury yield points on the curve was -7 basis points in June, versus -6 basis points in May.
ECONOMIC UPDATE
-400
-200
0 200
400
600
800
1,000
MOM 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 147,000 jobs in June, exceeding consensus expectations, and the last two months were revised up by 16,000.
Gains were primarily driven by state and local government education, while job growth in service sectors languished. The three-month moving average and six-month moving average payrolls totaled 150,000 and 130,000 respectively. The unemployment rate declined to
4.1% in June from 4.2% in May, due to a shrinking labor force. The labor participation rate dipped to 62.3%, remaining below the prepandemic level of 63.3%. The U-6 underemployment rate, which includes those who are marginally attached to the labor force and employed part time for economic reasons dropped to 7.7% in June. Average hourly earnings fell slightly, marking a 3.7% year-over-year increase.
Source: US Department of Labor Source: US Department of Labor
EMPLOYMENT
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 Core Deflator YOY % Change
Fed Target
YOY (%) Change
In May, the Consumer Price Index (CPI) cooled slightly more than consensus expectations. The headline CPI increased 0.1% month-overmonth and rose 2.4% year-over-year, while the Core CPI rose 0.1% month-over-month and 2.8% year-over-year. The Personal Consumption Expenditures (PCE) price index increased 0.1% month-over-month and rose 2.3% year-over-year in May. The Core PCE deflator, which excludes food and energy and is the Fed’s preferred gauge, increased 0.2% month-over-month and 2.7% year-over-year, up from April’s
2.6% year-over-year increase. Inflation is hovering above the Fed’s 2% target.
Source: US Department of Labor Source: US Department of Commerce
INFLATION
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 broadly anticipated, the Federal Open Market Committee (FOMC) left the Federal Funds Rate unchanged at the range of 4.25 - 4.50% at the June meeting. In the Summary of Economic Projections (SEP), Federal Reserve officials continued to pencil in two rate cuts in 2025, while downgrading estimates for economic growth and raising forecasts for both unemployment and inflation this year. The statement indicated that uncertainty about the economic outlook remained elevated but had diminished. The monthly redemption cap on Treasuries will remain at $5 billion, while the cap on agencies and mortgage-backed securities will be maintained at $35 billion. Since the Fed began its Quantitative Tightening campaign in June 2022, securities holdings have declined by about $2.2 trillion to approximately $6.7 trillion.
FEDERAL RESERVE
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
Effective Federal Funds Rate
Recession
Yield (%)
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
Jun-25
Mar-25
Jun-24
Yield (%)
At the end of June, the 2-year Treasury yield was 103 basis points lower, and the 10-Year Treasury yield was 17 basis points lower, yearover-year. The spread between the 2-year and 10-year Treasury yield points on the curve edged up to +51 basis points at June month-end versus +50 basis points at May month-end. The recent yield curve inversion which began in July 2022 was historically long. The average historical spread (since 2005) is about +99 basis points. The spread between the 3-month and 10-year Treasury yield points on the curve was -7 basis points in June, versus -6 basis points in May.
BOND YIELDS
ACCOUNT PROFILE
OBJECTIVES
So San Francisco | As of June 30, 2025
Investment Objectives
The City of South San Francisco's investment objectives, in order of priority, are to provide safety to ensure the preservation of capital in the overall portfolio, provide sufficient liquidity for cash needs and a market rate of return consistent with the investment program.
Chandler Asset Management Performance Objective
The performance objective for the portfolio is to earn a total rate of return through a market cycle that is equal to or above the return on the benchmark index.
Strategy
In order to achieve these objectives, the portfolio invests in high quality fixed income securities consistent with the investment policy and California Government Code.
CITY INVESTMENT PROGRAM COMPONENTS AS OF JUNE 30, 2025
Inception Market Value as of
June 30, 2025
Mid-Term Portfolio March 31, 2009 $213,524,343
Limited Maturity Portfolio January 31, 2023 $109,227,602 Pension Reserve Portfolio December 31, 2022 $6,222,354
Liquidity
(Investment Pools/Cash) N/A $62,334,056
Total Investment Program $391,308,356
Source: Chandler Asset Management. Includes accrued interest.
CITY INVESTMENT PROGRAM EARNINGS AS OF JUNE 30, 2025
FY 2024-25
Interest Income
FY 2023-24
Interest Income
Mid-Term Portfolio $ 6,546,466 $3,989,531
Limited Maturity Portfolio $ 3,365,828 $2,979,563
Pension Reserve Portfolio $ 268,062 $245,255
Total Investment Program
Managed by City’s
Investment Advisor
$ 10,180,356 $7,214,349
Liquidity
(Investment Pools/Cash) 2,684,004
Total Investment
Program Earnings $12,864,360
Source: Chandler Asset Management. Includes interest income and realized gains and losses. Does not include changes in fair value.
PORTFOLIO CHARACTERISTICS
So San Francisco Cons Portfolio | Account #10061 | As of June 30, 2025 6/30/2025
Portfolio
3/31/2025
Portfolio
Average Maturity (yrs) 1.68 1.78
Average Modified Duration 1.45 1.53
Average Purchase Yield 3.85% 3.79%
Average Market Yield 3.97% 4.07%
Average Quality** AA+ AA+
Total Market Value 391,308,356 369,712,144
*Benchmark: NO BENCHMARK REQUIRED
**The credit quality is a weighted average calculation of the highest of S&P, Moody’s and Fitch..
SECTOR DISTRIBUTION
So San Francisco Cons Portfolio | Account #10061 | As of June 30, 2025 Sector as a Percentage of Market Value
Sector 06/30/2025 03/31/2025
US Treasury 43.59% 40.62%
Corporate 14.77% 15.11%
LAIF 12.91% 19.69%
Money Mkt Fd 6.44% 0.17%
Agency CMBS 5.57% 5.58%
ABS 5.43% 5.75%
Agency 4.77% 6.09%
Supras 3.42% 3.58%
Cash 3.09% 3.40%
PORTFOLIO CHARACTERISTICS
So San Francisco Mid-Term (Chandler) | Account #10059 | As of June 30, 2025 Benchmark* 6/30/2025
Portfolio
3/31/2025
Portfolio
Average Maturity (yrs) 2.65 2.93 3.01
Average Modified Duration 2.48 2.51 2.59
Average Purchase Yield 3.76% 3.65%
Average Market Yield 3.78% 4.00% 4.16%
Average Quality** AA+ AA+ AA+
Total Market Value 213,524,343 210,326,181
*Benchmark: ICE BofA 1-5 Year Unsubordinated US Treasury & Agency Index **The credit quality is a weighted average calculation of the highest of S&P, Moody’s and Fitch. 3 Months 12 Months 2 Years 3 Years 5 Years 10 Years Since Inception
TOTAL RATE OF RETURN
So San Francisco MidTerm (CAM) 1.52% 6.45% 5.44% 3.73% 1.34% 1.92% 1.89% Benchmark 1.36% 6.06% 5.11% 3.24% 0.92% 1.61% 1.63%
*Periods over 1 year are annualized.
Benchmark: ICE BofA 1-5 Year Unsubordinated US Treasury & Agency Index Total rate of return: A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending market value; it includes interest earnings, realized and unrealized gains and losses in the portfolio.
INVESTMENT PERFORMANCE
So San Francisco Mid-Term (Chandler) | Account #10059 | As of June 30, 2025 Total Rate of Return : Inception | 04/01/2009
PORTFOLIO CHARACTERISTICS
So San Francisco Limited Maturity | Account #10590 | As of June 30, 2025 Benchmark* 6/30/2025
Portfolio
3/31/2025
Portfolio
Average Maturity (yrs) 1.85 0.15 0.10
Average Modified Duration 1.76 0.15 0.10
Average Purchase Yield 4.22% 4.29%
Average Market Yield 3.80% 4.21% 4.30%
Average Quality** AA+ AAA AAA
Total Market Value 109,227,602 68,207,569
*Benchmark: ICE BofA 1-3 Year US Treasury & Agency Index **The credit quality is a weighted average calculation of the highest of S&P, Moody’s and Fitch. 3 Months 12 Months 2 Years 3 Years 5 Years 10 Years Since Inception
TOTAL RATE OF RETURN
So San Francisco Limited Mat 1.04% 4.71% 5.06% 4.01% 2.45% 2.55% Benchmark 1.18% 5.67% 5.10% 3.42% 1.37% 2.12%
*Periods over 1 year are annualized.
Benchmark: ICE BofA 1-3 Year US Treasury & Agency Index Total rate of return: A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending market value; it includes interest earnings, realized and unrealized gains and losses in the portfolio.
INVESTMENT PERFORMANCE
So San Francisco Limited Maturity | Account #10590 | As of June 30, 2025 Total Rate of Return : Inception | 05/01/2018
PORTFOLIO CHARACTERISTICS
City of South San Fran Pen Res | Account #11042 | As of June 30, 2025 Benchmark* 6/30/2025
Portfolio
3/31/2025
Portfolio
Average Maturity (yrs) 2.65 2.97 3.02
Average Modified Duration 2.48 2.52 2.55
Average Purchase Yield 4.34% 4.35%
Average Market Yield 3.78% 3.97% 4.14%
Average Quality** AA+ AA+ AA+
Total Market Value 6,222,354 6,129,914
*Benchmark: ICE BofA 1-5 Year Unsubordinated US Treasury & Agency Index **The credit quality is a weighted average calculation of the highest of S&P, Moody’s and Fitch. 3 Months 12 Months 2 Years 3 Years 5 Years 10 Years Since Inception
TOTAL RATE OF RETURN
City of South San Fran Pen Res 1.51% 6.41% 5.44% 5.06%
Benchmark 1.36% 6.06% 5.11% 4.47%
*Periods over 1 year are annualized.
Benchmark: ICE BofA 1-5 Year Unsubordinated US Treasury & Agency Index Total rate of return: A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending market value; it includes interest earnings, realized and unrealized gains and losses in the portfolio.
INVESTMENT PERFORMANCE
City of South San Fran Pen Res | Account #11042 | As of June 30, 2025 Total Rate of Return : Inception | 01/01/2023
PORTFOLIO CHARACTERISTICS
So San Francisco Liquidity Portfolio | Account #10060 | As of June 30, 2025 Benchmark* 6/30/2025
Portfolio
3/31/2025
Portfolio
Average Maturity (yrs) 0.44 0.00 0.00
Average Modified Duration 0.42 0.00 0.00
Average Purchase Yield 3.48% 3.71%
Average Market Yield 4.21% 3.45% 3.68%
Average Quality** AA+ AAA AAA
Total Market Value 62,334,056 85,048,480
*Benchmark: ICE BofA US 6-Month Treasury Bill Index
**The credit quality is a weighted average calculation of the highest of S&P, Moody’s and Fitch.
IMPORTANT DISCLOSURES
So San Francisco | As of September 30, 2024
2024 Chandler Asset Management, Inc, An Independent Registered Investment Adviser.
Information contained herein is confidential. Prices are provided by ICE Data Services Inc (“IDS”), an independent pricing source. In the event IDS does not provide a price or if the price provided is not reflective of fair market value, Chandler will obtain pricing from an alternative approved third party pricing source in accordance with our written valuation policy and procedures. Our valuation procedures are also disclosed in Item 5 of our Form ADV Part 2A.
Performance results are presented gross-of-advisory fees and represent the client’s Total Return. The deduction of advisory fees lowers performance results. These results include the reinvestment of dividends and other earnings. Past performance may not be indicative of future results. Therefore, clients should not assume that future performance of any specific investment or investment strategy will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Economic factors, market conditions or changes in investment strategies, contributions or withdrawals may materially alter the performance and results of your portfolio.
Index returns assume reinvestment of all distributions. Historical performance results for investment indexes generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. It is not possible to invest directly in an index.
Source ICE Data Indices, LLC (“ICE”), used with permission. ICE permits use of the ICE indices and related data on an “asis” basis; ICE, its affiliates and their respective third party suppliers disclaim any and all warranties and representations, express and/or implied, including any warranties of merchantability or fitness for a particular purpose or use, including the indices, index data and any data included in, related to, or derived therefrom. Neither ICE data, its affiliates or their respective third party providers guarantee the quality, adequacy, accuracy, timeliness or completeness of the indices or the index data or any component thereof, and the indices and index data and all components thereof are provided on an “as is” basis and licensee’s use it at licensee’s own risk. ICE data, its affiliates and their respective third party do not sponsor, endorse, or recommend chandler asset management, or any of its products or services.
This report is provided for informational purposes only and should not be construed as a 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 not 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 rate 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 have to 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.
Ratings information have been provided by Moody’s, S&P and Fitch through data feeds we believe to be reliable as of the date of this statement, however we cannot guarantee its accuracy.
Security level ratings for U.S. Agency issued mortgage-backed securities (“MBS”) reflect the issuer rating because the securities themselves are not rated. The issuing U.S. Agency guarantees the full and timely payment of both principal and interest and carries a AA+/Aaa/AAA by S&P, Moody’s and Fitch respectively.
BENCHMARK DISCLOSURES
So San Francisco | As of September 30, 2024
Benchmark Disclosure
ICE BofA 1-5 Yr US Treasury & Agency Index
The ICE BofA 1-5 Year US Treasury & Agency Index tracks the performance of US dollar denominated US Treasury and nonsubordinated US agency debt issued in the US domestic market. Qualifying securities must have an investment grade rating (based on an average of Moody’s, S&P and Fitch). Qualifying securities must have at least one year remaining term to final maturity and less than five years remaining term to final maturity, at least 18 months to maturity at time of issuance, a fixed coupon schedule, and a minimum amount outstanding of $1 billion for sovereigns and $250 million for agencies.
ICE BofA 1-3 Yr US Treasury & Agency Index
The ICE BofA 1-3 Year US Treasury & Agency Index tracks the performance of US dollar denominated US Treasury and nonsubordinated US agency debt issued in the US domestic market. Qualifying securities must have an investment grade rating (based on an average of Moody’s, S&P and Fitch). Qualifying securities must have at least one year remaining term to final maturity and less than three years remaining term to final maturity, at least 18 months to maturity at time of issuance, a fixed coupon schedule, and a minimum amount outstanding of $1 billion for sovereigns and $250 million for agencies.