HomeMy WebLinkAboutFin Investment Report 2011.093 e®
CITY of Agenda Item No:
n. Meeting Date: October 17, 2011
SAN RAFAEL CITY COUNCIL AGENDA REPORT
Department: FINANCE
Prepared by: Van Bach City Manager Approval.
Accounting Supervisor
SUBJECT: INVESTMENT REPORT FOR SEPTEMBER 2011
RECOMMENDATION: ACCEPT INVESTMENT REPORT FOR THE MONTH ENDING
SEPTEMBER 30, 2011, AS PRESENTED
Pursuant to the State of California Government Code Section 53601, staff is required to provide the
governing body a report regarding the City's investment activities. Each month the Finance
Department prepares a report outlining the major investments for the preceding month. Included on
the report are the cost of each instrument, the interest rates (yield), maturity dates, and market value.
Separate schedules are prepared for both the City and Redevelopment Agency.
Beginning in January 2005, the City established a contract with MBIA to administer cash management
services to a portion of our portfolio. In February 2010, MBIA restructured its fixed-income asset
management subsidiary and changed their name to Cutwater Asset Management (Cutwater). Services
provided by Cutwater include updating our investment policy annually, cash flow administration, and
procurement of various instruments using Cutwater's market expertise (aligned with our needs). In
addition, Cutwater prepares a comprehensive monthly investment report that meets not only required
reporting information required by State law, but can be used as an asset management tool.
The September report contains information
excluding our West America checking account,
Cutwater reports provide a fair amount of detail.
Council might find most useful and informative.
ANALYSIS:
regarding the Cutwater managed operating funds,
which had a balance of $1,222,330 at month end. The
I am highlighting those pages that the community and
I will summarize elements of the key pages contained as an attachment with this report.
❖ Page 2 — Review of fixed income securities market — The Federal Open Market Committee met
on September 21, they announced "Operation Twist". The aim is to lower long-term interest
rates while leaving short-term rates unchanged. The Fed also pledged to keep the federal
funds rate near zero through mid -2013. Operation Twist will specifically target mortgage rates
by investing in agency mortgage-backed securities.
FOR CITY CLERK ONLY
File No.:
Council Meeting: J� `
Disposition:
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3
^� Page 8 — Recap of Securities Held— This page summarizes all of our operating funds. The
chart shows a majority of our investments are in U.S. instrumentalities. Most of the City's liquid
funds are held in the State of California LA|F poo|, which is used as a daily account for
vv|thdnmvva|o and deposits. Unrealized gains or losses are recorded only otfiscal yearend for
accounting purposes.
i*- Page 7 - Reflects Matu/itVDisbfbuti0n -A|| our operating cash funds are held to mature in |eoo
than one year (September 2012). One hundred percent of the total invested cash matures
within SOdays /agmin.the LA|F pool accounting for most ofthese do||ars\.
~�
Individual security information is presented on the ^S8Cuntimo //e6d^ (Daaea f). Specific
information iepresented 10 show interest coupon rates, cost and fair values, earned income and
projected net yields. Acquiring diversified instruments with varying maturity dates a||ovvo the
market values to stay close to historical cost.
^�
Purchases (paq9 18). sales (D8Vm YY) and transactions (Daae 13) are presented on separate
pages. This includes LA|F deposits and withdrawals for operating funds. LA|Factivi1y reflects
the need to move cash around as large receipts are deposited (monthly sales tax payments)
and expenses are incurred (weekly vendor payments and semi-monthly payro||).
Our LAW balance for September ended with a balance of $28.029.452. Portfolio returns on L/\F
dollars should be about 0.41 percent for September 2011. The percentage of investments held one
year orless is one hundred percent at month end. Byour own policy, this level ofliquidity ioadequate
to cover our cash flow projections in the coming months.
The City is well placed and diversified in the market for the coming months. By continuing our practice
of diversifying into various agencies with different maturity dates, the City's portfolio is strengthened
against both credit and market risk.
FISCAL IMPACT:
No financial impact occurs by adopting the report. The City continues to meet the phohh/ principles of
investing - safety. liquidity and yield in this respective order. The portfolio naDl@ins conservatively
invested. Sufficient liquidity exists to meet daily operating and capital project requirements for the next
six months. Operating fVnda, as defined for this report, exclude cash held with fiscal agents for the
payment V[bond principal and interest,
OPTIONS/ACTION REQUIRED:
The City Council should adopt the report as presented in order to satisfy current State Investment
Code requirements and City policy.
ATTACHMENTS
WVNanogvmomGervicee WomFle\Finance WorkFlexCoumj|MatenoKGtaffRoportm\2O11 11dnc
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Paee: 3
TREASURER'S CERTIFICATION
I CERTIFY THAT ALL INVESTMENTS MADE ARE IN CONFORMANCE WITH THE CITY'S
APPROVED INVESTMENT POLICY AND STATE INVESTMENT REGULATIONS. THE CITY HAS
SUFFICIENT LIQUIDITY TO MEET ALL OF THE OBLIGATIONS REQUIRED DURING THE NEXT
SIX-MONTH PERIOD.
JANET PENDOLEY
INTERIM FINANCE DIRECTOR
Cutwater Asset Management
1700 Broadway, Suite 2050
Denver, CO 80290
303 860 1100
Fax: 303 860 0016
Reports for the period September 1, 2011 — September 30, 2011
Please contact Accounting by calling the number above or email cam reDo rts(&cutwate r.com with questions concerning this report.
S&P/Case-Shiller Home Index
07/31/01 - 07/31/11
106R-1 I
Fixed Income Market Review
September 30, 2011
Treasury Yield Curves
08131111 - 09/30/11
.. ..... ... .. .... ... ** .. ... .. .. -------
. . . . . . . ............. I . ............ 50
5 7 15 30
Charts reprinted from Bloomberg L.P.
Page 2
Economic Indicators & Monetary Policv — At its latest meeting on
September 21", the Federal Open Market Committee (FOMC) kept the
federal funds target rate at a range of zero to 0.25 percent and pledged to
keep rates low thru mid -2013. The FOMC acknowledged that there are
"significant downside risks to the economic outlook." In response, the
Committee decided to "extend the average maturity of its holdings of
securities, The Committee intends to purchase, by the end of June 2012,
$400 billion of Treasury securities with the remaining maturities of 6 years
to 30 years and to sell an equal amount of Treasury securities with the
remaining maturities of 3 years or less." This strategy has been dubbed
"Operation Twist" by economists after a similar FOMC action in 1961.
The European sovereign -debt crisis has left many market participants risk -
averse. Although recent data has reflected a relatively tepid economic
recovery in the U.S., global market participants are still seeking the safety
of Treasury securities. Despite the recent downgrade of U.S. debt by
Standard & Poor's, Treasury yields shifted significantly lower during the
third-quarter. The larger fear is that a Greek default will trigger a deep
recession in Europe, with far-reaching consequences for the global
economy.
According to the Standard & Poor's/Case-Shiller index, property values fell
4.1 percent over the 12 -month period ending July 31, 2011. This was better
than the expected decline of 4.4 percent. Over the past month, home prices
remained essentially unchanged after seasonal adjustments. After rising 75
percent from July 2001 thru July 2006, home values have dropped 31
percent over the period July 2006 thru July 2011. (See Chart I.) The
housing market remains under stress with an enormous supply overhang of
existing homes.
Yield Curve & Spreads — Treasury yields were mixed in September after
the FOMC's decision on September 21'a to do "Operation Twist" to help
stimulate economic growth.
At the end of September, three-month Treasury bills yielded 0.02 percent,
six-month Treasury bills yielded 0.05 percent, two-year Treasuries yielded
0.24 percent, five-year Treasuries yielded 0.95 percent, 10 -year Treasuries
yielded 1.92 percent, and 30 -year bonds yielded 2.91 percent. (See Chart 2.)
Cutwater Asset Management
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City of San Rafael - City Operating Funds
Activity and Performance Summary
for the period September 1, 2011- September 30, 2011
Amortized Cost Basis Activitv Summary
Detail of Amortized Cost Basis Return
Beginning Amortized Cost Value
30,729,196,79
Interest
Accretion Realized
Total
Earned
(Amortization) Gain (Loss)
Income
Additions
Contributions
0.00
Current Holdings
Cash and Equivalent,,; 12,078.10
0,00 0.00
12,078,10
Interest Received
0,00
U.S. Instrumentality 416.67
18.12 0.00
434.79
Accrued Interest Sold
0.00
Corporate 2,083,33
73.72 0.00
2,157.05
Gain on Sales
0.00
Total 14,578.10
91,84 0.00
14,669.94
Total Additions
0.00
Deductions
Withdrawals
1,699,000.00
Fees Paid
1,000.00
Accrued Interest Purchased
0.00
Loss on Sales
0.00
Total Deductions
(1,700,000.00)
Accretion (Amortization) for the Period
91.84
Ending Amortized Cost Value
29,029,288.63
Ending Fair Value
29,033,069.84
Unrealized Gain (Loss)
3,781.21
Annualized Comparative Rates of Return
Summary of Amortized
Cost Basis Return for the Period
Twelve
Six
Month Trailing
Month Trailing
For the Month
Total Portfolio Excl. Cash Eq.
Fed Funds 0,13%
0,09%
0.09%
Interest Earned
14,578.10
2,500.00
Overnight Repo 0.07%
0.03%
0,05%
Accretion (Amortization)
91.84
91.84
3 Month I' -Bill 0,08%
0.03%
0.00%
Realized Gain (Loss) on Sales
0,00
0.00
Total Income on Portfolio
14,669.94
2,591.84
6 Month T -Bill 0 120%,
0,07%
0.02%
Average Daily Historical Cost
29,765,257.34
995,805.00
1 Year T -Note 0,22%
0,17%
0.1 I%
Annualized Return
0.60%
3.17%
2 Year T -Note 0.50%
0.42%
0,21%
Annualized Return Net of Fees
0.56%
1.94%
5 Year'F-Note L65%
1.51%
0,90%
Annualized Return Year to Date Net of Fees
0,63%
2.12%
Weighted Average Effective Maturity in Days
3
68
Amortized Cost Summary - Page 4 Cutwater Asset Management
City of San Rafael - City Operating Funds
Activity and Performance Summary
for the period September 1, 2011 - September 30, 2011
Fair Value Basis Activitv Summary
Detail of Fair Value Basis Return
Beginning Fair Value
30.735,111,34
Interest
Change in
Total
Earned
Fair Value
Income
Additions
Contributions
0,00
Current Holdings
Cash and Equivalents 12,078.10
0.00
12,078.10
Interest Received
0.00
U.S. Instrumentality 416.67
(314.00)
102.67
Accrued Interest Sold
0.00
Corporate 2,083.33
(1,727.50)
355.83
Total 14,578,10
(2,041.50)
12,536,60
Total Additions
0.00
Deductions
Withdrawals
1,699,000.00
Fees Paid
1,000,00
Accrued Interest Purchased
0.00
Total Deductions
(1,700,000.00)
Change in Fair Value for the Period
(2,041.50)
Ending Fair Value
29,031069.84
Annualized Comnarative Rates of Return
Summary of Fair Value Basis Return for the Period
Twelve
Six
Month Trailing
Month Trailing
For the Month
Total Portfolio
Excl. Cash Eq.
Fed Funds 0.13%
0.09%
0,09%
Interest Earned
14.578,10
2,500,00
Overnight Repo 0 07°,b
0.03%
0.05%
Change in Fair Value(2,041.50)(2,041,50)
Total Income on Portfolio
12,536.60
458.50
3 Month T -Bill 0.16%
0.12%
0.00%
Average Daily Historical Cost
29,765,257,34
995,805.00
6 Month T -Bill 033%
0.36%
0,12%
Annualized Return
0.51%
0,56%
1 Year T -Note 0.480X1
0,56%
(0,24%)
Annualized Return Net of Fees
0.47%
(0.66%)
2 YearT-Notc 1.31 %
2.89%
(1.09%)
Annualized Return Year to Date Net of Fees
0.43%
0,33%
5 Year T -Note 5.05%
1546%
1.09%
Weighted Average Effective Maturity in Days
3
68
Fair Value Suininary - Page 5 Cutwatcr Asset Management
City of San Rafael - City Operating Funds
Recap of Securities Held
September 30, 2011
Portfolio / Segment Diversification
0 Cash and Equivalents 96.6%
U.S. Instrumentality
Corporate 1.7%
Total: 100.0%
Holdings Recap - Page 6 Cutwater Asset Management
Weighted
Weighted
Weighted
Unrealized
Average
Average
Weighted
Average
Ifisiolical
Amortized
Gain
Final
Effective
Portfolio,
Average
Market
Cost
COST
Fair Value
(Loss)
Maturity (Days)
Maturity (Days)
Segment
Yield
Duration (Years)
Cash and Fquivalents 28,029,452,34
28,029,452 34
28,029,452.34
0,00
1
1
96,57
0.41
000
U S Instrumentality 499,535 00
499,946.86
501.050.00
1,103.14
89
89
1,72
104
0.24
Corporate 496,27() 00
499,889,43
502,56250
2,67807
46
46
1 71
5.20
0.12
TOTAL 29,025,257.34
29,029,288.63
29,033,069.84
3,781.21
3
3
100.00
0.50
0.01
* Weighted Average Yield is calculated on a "yield to worst" basis.
Portfolio / Segment Diversification
0 Cash and Equivalents 96.6%
U.S. Instrumentality
Corporate 1.7%
Total: 100.0%
Holdings Recap - Page 6 Cutwater Asset Management
City of San Rafael - City Operating Funds
Maturity Distribution of Securities Held
September 30, 2011
Maturity
Historical Cost
Percent
Under 90 Days
29,025.257.34
100 00 %
90 To 180 Days
0.00
0.00%
180 Days to 1 Year
0.00
0,00%
1 To 2 Years
0,00
0.00°
2 To 5 Years
0.00
0.00%
Over 5 Years
0.00
000%
29,025,257.34
100.00°/
Maturity Distribution
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28M
24Mx
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Maturity Distribution - Page 7 Cutwater Asset Management
City of San Rafael - City Operating Funds
Securities Held
September 30, 2011
U.S. instrumentality
3133XVRS2 11/18/09 1000 12/28/11 500,00000 499,535.00
FHLB 0.00
500,000 00 499,535.00
TOTAL 500,00000
Corporate
36962GT38 09/19/07 5 000 11/15/11 500,000,00 496,270.00
GE Capital 0.00
500,000.00 496,270.00
TOTAL . 0.00
GRAND TOTAL. 29,029,452.34 29,025,257.34
0.00
V variable rate, current rate shown, average rate for Cash & Equivalents
Unrealized
501,050.00
Historical Cost/
Amortized
Fair Value/
C1Isip/ Purchase Rate/
Maturity/ Par Value/
Accrued Interest
Cost/Accretion
Change
Description Date Coupon
Call Date Shares
Purchased
(Amortization)
to Fair Value
Cash and Euuivalents
0.00
12,078.10
30,273 34
96.57 041
LAIF 09/30/11 0.408V
28,029,452.34
28,029,452.34
28,029,452.34
28,029,452.34
000
0.00
0,00
2,67807
28,029,452 34
28,029,452.34
28,029,452.34
28.029,452.34
T01'nI.
(1,72T50)
0.00
0.00
000
U.S. instrumentality
3133XVRS2 11/18/09 1000 12/28/11 500,00000 499,535.00
FHLB 0.00
500,000 00 499,535.00
TOTAL 500,00000
Corporate
36962GT38 09/19/07 5 000 11/15/11 500,000,00 496,270.00
GE Capital 0.00
500,000.00 496,270.00
TOTAL . 0.00
GRAND TOTAL. 29,029,452.34 29,025,257.34
0.00
V variable rate, current rate shown, average rate for Cash & Equivalents
Unrealized
501,050.00
1,103.14
Total
%
Gain
Interest
Interest
Accrued
Poll
(Loss)
Received
Famed
Interest
Cost Yield
0.00
0.00
12,078.10
30,273 34
96.57 041
0.00
000
12,078.10
30,273.34
96.57
499,946.86
501,050.00
1,103.14
000
416.67
1,291.67
172 104
18.12
(314.00)
499,946.86
501,050.00
1,103.14
000
416.67
1,291.67
1.72
18.12
t314.00)
499,889.43
502,567.50
2,67807
0.00
2,083.33
9,444.44
1.71 5.20
73.72
(1,72T50)
499,889 43
502,567.50
2,678.07
000
2,083.33
9,444.44
1.71
73,72
(1,727.50)
29,029,288,63
29,033,069.84
3,781.21
0.00
14,578.10
41,009.45
100.00
91.84
(2,041.50)
Holdings - Page 8
Cutwater Asset Management
City of San Rafael - City Operating Funds
GASB 40 - Deposit and Investment Risk Disclosure
September 30, 2011
GASB 40 - Page 9 Cutwater Assel Management
Maturity Call
S&P
Moody
Par Value
Historical
% Portfolio
Market
% Portfolio
Weighted Avg
CUSIP Type
Coupon
Date Date
Ratury
R.fi—
Sh.w,
(,.qt
14ig(4)jt
V211le
Mkt Value
Mkt Dur (Yrs)
LME
Cash and F,quivalents
0408
AAA
Ana
28,029,452.34
28,029,452.34
9657
28,029,452 34
9654
000
ISSUER TOTAL
28,029,452.34
28,029,452.34
96.57
28,029,452.34
96.54
0.00
FHLB
3133XVRS2 U S Instrunientalit)
1000
12/28/2011
AA+
Aaa
500,00000
499,53500
1.72
501,050.00
1.73
024
ISSUER TOTAL
500,000.00
499,535.00
1,72
501,050,00
1.73
0.24
GE Capital
36962GF38 Corporate
5.000
11/15/2011
AA+
Aa2
500,00000
496,270.00
1.71
502,567,50
1.73
0.12
ISSUER TOTAL
500,000.00
496,270.00
1.71
502,567,50
1.73
0.12
GRAND TOTAL.
29,029,452.34
29,025,257.34
IKOO
29,033,069.84
100.00
0.01
Highlighted totals are issuers representing 5 OM,b
or more of the portfolio's
market value,
GASB 40 - Page 9 Cutwater Assel Management
Purchases - Page 10 Cutwatcr Asset Management
Yield
0,41
0,41
City of San Rafael - City Operating Funds
Securities Purchased
for the period September 1, 2011 - September 30, 2011
CUSI P/
Purchase
Rate/
Maturity/ Par Value/ Unit
Principal
Accrued
Descripto.
Date
Coupon
Call Date Shares Cost
Cost
Interest Purchased
Cash and Eauivalents
LAIF
()9/01/2011
0-408V
500,000.00 100,000
500,000.00
0,00
LAIF
09/26/2011
0,409 V
1,800,000.00 100,000
1,800,000m
0.00
TOTAL
2,300,000.00
2,300,000.00
0,00
GRAND TOTAL
2,300,000.00
2,300,000.00
0.00
V = variable tate, opening rate shown,
average rate For Cash
& Equivalents
Purchases - Page 10 Cutwatcr Asset Management
Yield
0,41
0,41
City of San Rafael - City Operating Funds
Securities Sold and Matured
for the period September 1, 2011- September 30, 2011
Sales - Page 1 I Cutwater Asset Management
Sale or
Amortized Cost at
Sale/
Fair Value at
Realized
Accrued
CUSIP/
Maturity
Rate' Maturity/
Par Value/
Historical
Sale or Maturity ;
Maturity
Sale or Maturity
Gain
Interest
interest
Interest
Description
mate
Coupon gall bate
Shares
Cost
Accr / (Amort)
Price
Che. In Fair Value
(Loss)
Sold
Received
Earned Yield
Cash and Eauivalents
LAIF
09/13/11
0 408 V
2,800,000 00
2,800,000.00
2,800,000 00
10000
2,800,000 00
0.00
000
000
0.00 041
000
0.00
LAIF
09/29/11
0 408 V
1,200 000 00
1,200,000.00
1,200,000 00
100.00
1,200,000.00
0.00
000
0.00
0.00 0,41
0.00
0.00
I TOTAL.
4,000,000.00
4,000,000.00
4,000,000.00
4,000,000.00
0.00
000
000
0.00
0.00
0.00
GRAND TOTAI.
4,000,000.00
4,000,000.00
4,000,000.00
4,000,000.00
0.00
0.00
0.00
0.00
0.00
0.00
V — variable rate, current
rate shown,
average rate for Cash & Cash
Equivalents
Sales - Page 1 I Cutwater Asset Management
Balance
(500,000 00)
2,300,000.00
500,000 00
1,700,000.00
1,700,000.00
Transactions - Page 12 Cutwater Asset Management
City of San Rafael - City Operating Funds
Transaction Report
for the period September 1, 2011- September 30, 2011
Date CUSIP
Transaction
See 'type
Description Maturity PAR Value/Shares Principal
Interest
Transaction Total
09/01/2011
Bought
CF.
LAIF 500,000.00 500,000 00
000
(500,000.00)
09./13/2011
Sold
CI✓
LAIF 2,800,000,00 2,800,000.00
0.00
2,800,000.00
09/26/2011
Bought
CF.
LAIF 1,800,000.00 1,800,000.00
0.00
(1,800,000.00)
09/29/2011
Sold
CL.
LAIF 1,200,000.00 1,200,000.00
0.00
1,200,000.00
Portfolio Activity Total
Net Contributions
0.00
Net Withdrawals
' 1,699,000.00 ( Fees Charged 1,000.00 (
Fees Paid
1,000.00
Balance
(500,000 00)
2,300,000.00
500,000 00
1,700,000.00
1,700,000.00
Transactions - Page 12 Cutwater Asset Management
Trans Settle Description
No Activity this period
City of San Rafael - City Operating Funds
Securities Bid and Offer
for the period Sept 1, 2011 - Sept 30, 2011
Call Date Broker Par Value Discount Price YTM/YTC Competitive Bids
Securities Purchased Bid and Offer - Page 13
Cutwater Asset Management
Date Cransaction CUSIP
City of San Rafael - City Operating Funds
Upcoming Cash Activity
for the next 45 days
N ext
Description Coupon Maturity Call Date Par / Shares
NOTE: There is no activity for the period.
Upcoming Cash Activity - Page 14
Transaction
Principal Interest Total
Cutwater Asset Management