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HomeMy WebLinkAbout03/17/2020 06C February 2020 Investment Transactions Report to\'4\lyy tbxk ik 1 PP1-:4P PPP g. A P p P 1 PPi ittYlltYlt.\ta. BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 6.C. For Meeting of: March 17, 2020 ITEM TITLE: February 2020 Investment Transactions Report SUBMITTED BY: Steve Groom, Director of Finance and Budget SUMMARY EXPLANATION: Monthly report of all investment transactions. Each investment is in full compliance with the City's Investment Policy, State Statues and City Municipal Code. In addition to one $3 million investment being called and replaced with three $1 million investments, this month's activity included a rare divestiture that was replaced with six$1 million investments, greatly improving the city's diversification both by maturity date and issuer. The complete diversification rationale is included in the attached investment report along with committee-reviewed rationales, as always, for each individual investment purchased during the month. This monthly report is in compliance with RCW 35.39.032 which requires "The responsible official or committee shall make a monthly report of all investment transactions to the city legislative authority" A complete Treasury report is provided to City Council quarterly that provides a complete position listing with further analysis, economic outlook and strategy updates. ITEM BUDGETED: NA STRATEGIC PRIORITY: Public Trust and Accountability APPROVED FOR SUBMITTAL BY THE CITY MANAGER RECOMMENDATION: Review only. Submitted for routine transparency and accountability. ATTACHMENTS: Description Upload Date Type L Feb2020 In at ent e 3/3/ 020 backup Material 2 FINANCE DATE: February 25, 2020 TO: Mayor and City Council FROM: Steve Groom, Finance Director RE: February 2020 Investment Transactions The investment transactions for February 2020 were: Called/Sold: • $3,000,000 FFCB (1 .95%) called Jan. 30, 2020 • $3,203,000 REFCORP (1 .720%) sold Feb. 4, 2020 • $2,137,000 REFCORP (1 .820%) sold Feb. 4, 2020 • $1 ,000,000 REFCORP (1 .730%) sold Feb. 4, 2020 Purchased: • $1 ,000,000 US Treasury (1 .496%) to mature Jun. 30, 2020 • $1 ,000,000 FHLB (1 .540%) to mature Aug. 25, 2020 • $1 ,000,000 US Treasury (1 .452%) to mature Mar. 31 , 2021 • $1 ,000,000 FNMA (1 .422%) to mature Apr. 05, 2022 • $1 ,000,000 FFCB (1 .430%) to mature Nov. 07, 2022 • $1 ,000,000 FAMCA (1 .473%) to mature Jan. 10, 2024 • $1 ,000,000 US Treasury (1 .413%) to mature Apr. 30, 2024 • $1 ,000,000 FHLB (1 .480%) to mature Dec. 13, 2024 • $1 ,000,000 FAMCA (1 .495%) to mature Jan. 03, 2025 What these investments accomplished: 1 . Protected average yield, in an eroding yield environment, 2. Improved diversification by maturity date and by issuer, 3. Improved predictability of budgeted revenue. The Investment Committee reviewed and approved the rationale for each purchase. The summary page from the Investment Committee review of each transaction is attached and articulates the rationale for each purchase at the time it was made. Each investment is in full compliance with the City's Investment Policy, State Statues and City Municipal Code. Each transaction considered ongoing cash flows from city operations, debt obligations, liquid and maturing securities, and contingencies to meet the City's future cash flow requirements. This monthly report of all investment transactions complies with RCW 35.39.032 ("The responsible official or committee shall make a monthly report of all investment transactions to the city legislative authority'). 3 it".:14:4.*!...4.;Mil ,k Ic%::;;i!iiiii.t.. iiii!; ........g -.v.:. *. *"':i FINANCE City of Yakima flvestrnent Portfolio Maturity Dates and Amounts , -.en. 28,2020 <LON:LOX) 53.00Q,,.00 ,1 :: : .. ... ::' ::: .. ... .. ... - ... ... .... .. .... ..., .... ..., .... ..., .... ... .... ..., .... .. ... HE . : :I II II 1111 11 111 11111 1111111111E113 111111 City of Yakima Diversification by Issuer- Feb. 28, 2020 Treas., $7,000,000,9% min, FAMCA, 55,000,000.6% .xii::iffgt-tM§F $8,630,000 *gti IX:iititt4 W 10% *iiii!i rzti#3 i:P=* RE FCORP, $4,789,000,6% AHlif.,' . . 4 it::r Apse, $1,000.,000,I% I ° BNY, $1,0011,000,1% . •Ir.:" ...„=„0,420. USBancorp, $1,000,1X10.1% ' ... .. RCS, ,,,x..............................................................................:::::::::::::::::::::::::::::::::::::::::x.x.x.x.x.x.x.x.x.x.x.: Microsoft, 51,0(X:1,000,1% .4iitintiggit,fiiii:i1,1$giiiiii$1:Kg:KEERBEHEREFF 4 Ir' r—. •FJ.F' x .-F'si '.5 r,. .Sx d! J FF' FINANCE Committee Review of Divestment Rationale Date: February 7, 2020 Investment# 1493 is a Resolution Funding Corp (RFCSP) Agency face value $3,203,000, maturity date October 15, 2020, purchased December 14, 2016 to yield 1.716%. Investment# 1495 is a Resolution Funding Corp (RFCSP) Agency face value $2,137,000, maturity date January 15, 2021, purchased April 6, 2017 to yield 1.821%. Investment# 1499 is a Resolution Funding Corp (RFCSP) Agency face value $1,000,000, maturity date January 15, 2021, purchased October 6, 2017 to yield 1.730%. This position is being divested to: 1) Increase Diversification by maturity date by reducing two $5M+ spikes set to mature 10/2020 and 01/2021, large bets on reinvestment rates 2) Realize small market gains that offset the small decreased yields over the remaining 9- and 12-month remaining terms 3) Increase Liquidity by replacing this zero-coupon investment with securities that receive bi-monthly coupon payments. 4) Improve stability and predictability of budget forecasting future interest 5) Reinvesting in Treasuries and diversified Non-callable agencies brings no appreciable change to the portfolio's overall safety As the attached graphs show, the City had particularly large maturities in October 2020 and January 2021, exposing two large portions of our portfolio to the reinvestment environment of whatever rates happen to be in those months. By smoothing maturities in the future by reinvesting in $1 or $2 million pieces, our reinvestment risk is reduced. The city continues to have a $19,8 million balance in the State LGIP pool, a 45-day weighted average maturity pool that provides plenty of liquidity, as our historical cashflow demonstrates, but is more susceptible to rate volatility than the laddered portion of our portfolio. Investment Committee review: Finance Director: . Date z '' 7070 --� City Manager: I4'14A4 / Date 9 1� � D., 5 1:71111416VX 1 r FINANCE Committee Review of Investment Rationale Date: February 3, 2020 Investment# 2020-1547 is a 4-month US Treasury, face value $1,000,000, maturing June 30, 2020, 1.625% coupon purchased at 100.0508 to yield 1.496%. This trade settles February 4,2020 with Wedbush Securities,US Bank Safekeeping. This investment is the first of three replacing a $3,000,000 FFCB investment called on January 30th. Liquidity: At January 31st, month-end, Key Bank checking account balance was $5.1 million (target is $3 Million), US Bank checking balance was $8.0 million and invested yield segment of portfolio was $61.2 million (target is $60 million for Treasuries, Corporates and Agencies). Current LGIP balance was $19.8 million (target minimum is $5 million). Safety: This purchase is a debt issue of the federal government—equivalent to Aaa/AA+ rating by Moody's and S&P. Yield. Yield is 1.496%. This investment is 20 basis points under LGIP, seeking to protect yield in an eroding yield / uncertain environment. Comparable yields are: LGIP current 30-day yield 1.7031% www.secureaccess.wa.gov 6-month Treasury 1.5600% Treasury.gov Callability. This investment is not callable (a bullet). Diversification. This purchase bring this issuer to 7.2% of total portfolio. This purchase adds a maturity date previously not covered to city's laddered portfolio. Outlook. The yield curve is currently slightly inverted; the 1-year Treasury at 1.46, the 2- year at 1.36 and the 5-year at 1.35. The Federal Reserve Bank recently executed the third of three expected 1/4-point rate cuts in 2019 with further cuts expected in 2020. We are continuing to fill maturity gaps in the ladder to minimize reinvestment risk subject to rates at any one point in time and decreasing variable rate LGIP exposure. Investment Committee review: Finance Director: Date 2- "7 City Manager: Date —110-C 7417) 6 FINANCE Committee Review of Investment Rationale Date: February 3, 2020 Investment # 2020-1548 is a 6-month Federal Home Loan Bank (FHLB), face value $1,000,000, maturing August 25, 2020, 1.750% coupon purchased at 100.1159 to yield 1.540%. This trade settles February 4, 2020 with Wedbush Securities, US Bank Safekeeping. This investment is the second of three replacing a $3,000,000 FFCB investment called on January 30th. Liquidity: At January 31st, month-end, Key Bank checking account balance was $5.1 million (target is $3 Million), US Bank checking balance was $8.0 million and invested yield segment of portfolio was $61.2 million (target is $60 million for Treasuries, Corporates and Agencies). Current LGIP balance was $19.8 million (target minimum is $5 million). Safety: This purchase is a debt issue of a government—sponsored enterprise (GSE), that carries an explicit Federal guarantee, equivalent to Aaa/AA+ rating by Moody's and S&P. Yield. Yield is 1.540%. This investment is 16 basis points under LGIP, seeking to protect yield in an eroding yield / uncertain environment. Comparable yields are: LGIP current 30-day yield 1.7031% www.secureaccess,wa.gov 6-month Treasury 1.5600% _Treas1gov Callability. This investment is not callable (a bullet). Diversification. This purchase bring this issuer to 8.5% of total portfolio. This purchase adds a maturity date previously not covered to city's laddered portfolio. Outlook. The yield curve is currently slightly inverted; the 1-year Treasury at 1.46, the 2- year at 1.36 and the 5-year at 1.35. The Federal Reserve Bank recently executed the third of three expected IA-point rate cuts in 2019 with further cuts expected in 2020. We are continuing to fill maturity gaps in the ladder to minimize reinvestment risk subject to rates at any one point in time and decreasing variable rate LGIP exposure. Investment Committee review: Finance Director: Date 2 7 2oza City Manager: WI/ Date Q I DC a) 7 ke:\ *.e? L?^". FINANCE Committee Review of Investment Rationale Date: February 3, 2020 Investment # 2020-1549 is a 1-year US Treasury, face value $1,000,000, maturing March 31, 2021, 1.250% coupon purchased at 99.7695 to yield 1.452%. This trade settles February 4, 2020 with Wedbush Securities, US Bank Safekeeping. This investment is the third of three replacing a $3,000,000 FFCB investment called on January 30th. Liquidity: At January 31st, month-end, Key Bank checking account balance was $5.1 million (target is $3 Million), US Bank checking balance was $8.0 million and invested yield segment of portfolio was $61.2 million (target is $60 million for Treasuries, Corporates and Agencies). Current LGIP balance was $19.8 million (target minimum is $5 million). Safety:This purchase is a debt issue of the federal government —equivalent to Aaa/AA+ rating by Moody's and S&P. Yield. Yield is 1 .452%. This investment is 24 basis points under LGIP, seeking to protect yield in an eroding yield I uncertain environment. Comparable yields are: LGIP current 30-day yield 1.7031% www.secureaccess.wa.gov 6-month Treasury 1.5600% Treasury.gov Callability. This investment is not callable (a bullet). Diversification. This purchase bring this issuer to 7.2% of total portfolio. This purchase adds a maturity date previously not covered to city's laddered portfolio. Outlook. The yield curve is currently slightly inverted; the 1-year Treasury at 1.46, the 2- year at 1.36 and the 5-year at 1.35. The Federal Reserve Bank recently executed the third of three expected %-point rate cuts in 2019 with further cuts expected in 2020. We are continuing to fill maturity gaps in the ladder to minimize reinvestment risk subject to rates at any one point in time and decreasing variable rate LGIP exposure. Investment Committee review: / / /Finance Director: Date 2 i 20 -c) City Manager: Date k--t1.-74e.cx) 8 1:-"Atrft FINANCE Committee Review of Investment Rationale Date: February 12, 2020 Investment # 2020-1550 is a 2-year Federal National Mortgage Association (FNMA or Fannie Mae), face value $1,000,000, maturing April 5, 2022, 1.875% coupon purchased at 100.9506 to yield 1.422%. This trade settles February 14, 2020 with Wedbush Securities, US Bank Safekeeping. This investment is the first of six replacing a $6,253,465 Resolution Funding Corporatoin investment sold on February iith. Liquidity: At January 31st, month-end, Key Bank checking account balance was $5.1 million (target is $3 Million), US Bank checking balance was $8.0 million and invested yield segment of portfolio was $61.2 million (target is $60 million for Treasuries, Corporates and Agencies). Current LGIP balance was $19.8 million (target minimum is $5 million). Safety: This purchase is a debt issue of a government—sponsored enterprise (GSE), that carries an explicit Federal guarantee, equivalent to Aaa/AA+ rating by Moody's and S&P. Yield. Yield is 1,422%. This investment is 16 basis points under LGIP, seeking to protect yield in an eroding yield / uncertain environment. Comparable yields are: LGIP current 30-day yield 1.7031% www.secureaccess.wa.gov 2-year Treasury 1.4100% Treasury.gov Callability. This investment is not callable (a bullet). Diversification. This purchase bring this issuer to 14.5% of total portfolio. This purchase adds a maturity date previously not covered to city's laddered portfolio. Outlook. The yield curve is currently slightly inverted; the 1-year Treasury at 1.486, the 2-year at 1.41 and the 5-year at 1.40. The Federal Reserve Bank recently executed the third of three expected 1/4-point rate cuts in 2019 with further cuts expected in 2020. We are continuing to fill maturity gaps in the ladder to minimize reinvestment risk subject to rates at any one point in time and decreasing variable rate LGIP exposure. Investment Committee review Finance Director: Date 2- z/202-0 LltCity Manager: Date 2 FDI 9 l'�.r�. /4 741 r FINANCE Committee Review of Investment Rationale Date: February 12, 2020 Investment # 2020-1551 is a 2-year Federal Farm Credit Bank (FFCB), face value $1,000,000, maturing November 7, 2022, 1.960% coupon purchased at 101.413 to yield 1.430%. This trade settles February 14, 2020 with Wedbush Securities, US Bank Safekeeping. This investment is the second of six replacing a $6,253,465 Resolution Funding Corporation investment sold on February 11th Liquidity: At January 315', month-end, Key Bank checking account balance was $5.1 million (target is $3 Million), US Bank checking balance was $8.0 million and invested yield segment of portfolio was $61.2 million (target is $60 million for Treasuries, Corporates and Agencies). Current LGIP balance was $19.8 million (target minimum is $5 million). Safety: This purchase is a debt issue of a government—sponsored enterprise (GSE), that carries an explicit Federal guarantee, equivalent to Aaa/AA+ rating by Moody's and S&P. Yield, Yield is 1.430°I0. This investment is 27 basis points under LGIP, seeking to protect yield in an eroding yield / uncertain environment. Comparable yields are: LGIP current 30-day yield 1.7031% www.secureaccess.wa.gov 2-year Treasury 1.4100% Treasury.gov Callability. This investment is not callable (a bullet). Diversification. This purchase bring this issuer to 13.3% of total portfolio. This purchase adds a maturity date previously not covered to city's laddered portfolio. Outlook. The yield curve is currently slightly inverted; the 1-year Treasury at 1.486, the 2-year at 1.41 and the 5-year at 1.40. The Federal Reserve Bank recently executed the third of three expected 1/4-point rate cuts in 2019 with further cuts expected in 2020. We are continuing to fill maturity gaps in the ladder to minimize reinvestment risk subject to rates at any one point in time and decreasing variable rate LGIP exposure. Investment Committee review: f Finance Director: Date 2 20247 14/) City Manager: Mana Date " /I 10 FINANCE Committee Review of Investment Rationale Date: February 12, 2020 Investment # 2020-1552 is a 4-year Federal Agriculture Mortgage Corporation (FAMCA or Farmer Mac), face value $1,000,000, maturing January 10, 2024, 1.590% coupon purchased at 100.443 to yield 1.473%. This trade settles February 14, 2020 with Wedbush Securities, US Bank Safekeeping. This investment is the third of six replacing a $6,253,465 Resolution Funding Corporation investment sold on February 1 ith. Liquidity: At January 31si, month-end, Key Bank checking account balance was $5,1 million (target is $3 Million), US Bank checking balance was $8.0 million and invested yield segment of portfolio was $61.2 million (target is $60 million for Treasuries, Corporates and Agencies). Current LGIP balance was $19.8 million (target minimum is $5 million). Safety: This purchase is a debt issue of a government—sponsored enterprise (GSE), that carries an explicit Federal guarantee, equivalent to Aaa/AA+ rating by Moody's and S&P. Yield. Yield is 1.473%. This investment is 27 basis points under LGIP, seeking to protect yield in an eroding yield I uncertain environment. Comparable yields are: LGIP current 30-day yield 1.7031°/© www.secureaccess.wa.gov 2-year Treasury 1.4100% Treasury.gov Callability. This investment is not callable (a bullet). Diversification. This purchase bring this issuer to 6.05% of total portfolio. This purchase adds a maturity date previously not covered to city's laddered portfolio. Outlook. The yield curve is currently slightly inverted; the 1-year Treasury at 1.486, the 2-year at 1 .41 and the 5-year at 1.40. The Federal Reserve Bank recently executed the third of three expected %-point rate cuts in 2019 with further cuts expected in 2020. We are continuing to fill maturity gaps in the ladder to minimize reinvestment risk subject to rates at any one point in time and decreasing variable rate LGIP exposure. Investment Committee review: Finance Director: Date 2- z 7/ City Manager: Date 1 1 • FINANCE Committee Review of Investment Rationale Date: February 12, 2020 Investment # 2020-1553 is a 4-year US Treasury, face value $1,000,000, maturing April 30, 2024, 2.250% coupon purchased at 103.4062 to yield 1.413%. This trade settles February 14, 2020 with Wedbush Securities, US Bank Safekeeping. This investment is the fourth of six replacing a $6,253,465 Resolution Funding Corporation investment sold on February 1 ith. Liquidity: At January 31st, month-end, Key Bank checking account balance was $5.1 million (target is $3 Million), US Bank checking balance was $8.0 million and invested yield segment of portfolio was $61.2 million (target is $60 million for Treasuries, Corporates and Agencies). Current LGIP balance was $19.8 million (target minimum is $5 million). Safety: This purchase is a debt issue of the federal government — equivalent to Aaa/AA+ rating by Moody's and S&P. Yield. Yield is 1.413%. This investment is 33 basis points under LGIP, seeking to protect yield in an eroding yield / uncertain environment. Comparable yields are: LGIP current 30-day yield 1.7031% www.secureaccess.wa.gov 5-year Treasury 1.4000% Treasury.gov Callability. This investment is not callable (a bullet). Diversification. This purchase bring this issuer to 8.5% of total portfolio. This purchase adds a maturity date previously not covered to city's laddered portfolio. Outlook. The yield curve is currently slightly inverted; the 1-year Treasury at 1.486, the 2-year at 1.41 and the 5-year at 1.40. The Federal Reserve Bank recently executed the third of three expected %-point rate cuts in 2019 with further cuts expected in 2020. We are continuing to fill maturity gaps in the ladder to minimize reinvestment risk subject to rates at any one point in time and decreasing variable rate LGIP exposure. Investment Committee review: - Finance Director: Date 2-/7.-- DI City Manager: Date 12 FINANCE Committee Review of Investment Rationale Date: February 12, 2020 Investment # 2020-1554 is a 5-year Federal Home Loan Bank (FHLB), face value $1,000,000, maturing December 13, 2024, 2.750% coupon purchased at 105.8979 to yield 1.480%. This trade settles February 14, 2020 with Wedbush Securities, US Bank Safekeeping. This investment is the fifth of six replacing a S6,253,465 Resolution Funding Corporation investment sold on February 11 th. Liquidity: At January 31 st, month-end, Key Bank checking account balance was $5.1 million (target is $3 Million), US Bank checking balance was $8.0 million and invested yield segment of portfolio was $61.2 million (target is $60 million for Treasuries, Corporates and Agencies). Current LGIP balance was $19.8 million (target minimum is $5 million). Safety: : This purchase is a debt issue of a government-sponsored enterprise (GSE), that carries an explicit Federal guarantee, equivalent to Aaa/AA+ rating by Moody's and S&P. Yield. Yield is 1.480%. This investment is 22 basis points under LGIP, seeking to protect yield in an eroding yield / uncertain environment. Comparable yields are: LGIP current 30-day yield 1.7031% www.secureaccess.wa.gov 5-year Treasury 1.4000% Treasury.gov Callability. This investment is not callable (a bullet). Diversification. This purchase bring this issuer to 9.7% of total portfolio. This purchase adds a maturity date previously not covered to city's laddered portfolio. Outlook. The yield curve is currently slightly inverted; the 1-year Treasury at 1.486, the 2-year at 1.41 and the 5-year at 1.40. The Federal Reserve Bank recently executed the third of three expected 1/4-point rate cuts in 2019 with further cuts expected in 2020. We are continuing to fill maturity gaps in the ladder to minimize reinvestment risk subject to rates at any one point in time and decreasing variable rate LGIP exposure. Investment Committee review: Finance Director: � Date 2 v 2o1.4; 1/14 City Manager: Date Jl `y ' 13 � iwr fs r5H FINANCE Committee Review of Investment Rationale Date: February 12, 2020 Investment # 2020-1555 is a 5-year Federal Agriculture Mortgage Corporation (FAMCA or Farmer Mac), face value $1,000,000, maturing January 3, 2025, 1.750% coupon purchased at 101.1943 to yield 1.495°/©. This trade settles February 14, 2020 with Wedbush Securities, US Bank Safekeeping. This investment is the sixth of six replacing a $6,253,465 Resolution Funding Corporation investment sold on February 11th. Liquidity: At January 31st, month-end, Key Bank checking account balance was $5.1 million (target is $3 Million), US Bank checking balance was $8.0 million and invested yield segment of portfolio was $61.2 million (target is $60 million for Treasuries, Corporates and Agencies). Current LGIP balance was $19.8 million (target minimum is $5 million). Safety: This purchase is a debt issue of a government-sponsored enterprise (GSE), that carries an explicit Federal guarantee, equivalent to Aaa/AA+ rating by Moody's and S&P. Yield. Yield is 1.495%. This investment is 21 basis points under LGIP, seeking to protect yield in an eroding yield / uncertain environment. Comparable yields are: LGIP current 30-day yield 1.7031% www.secureaccess.wa.gov 5-year Treasury 1 .4000% Treasury.gov Callability. This investment is not callable (a bullet). Diversification. This purchase bring this issuer to 6.0% of total portfolio. This purchase adds a maturity date previously not covered to city's laddered portfolio. Outlook. The yield curve is currently slightly inverted; the 1-year Treasury at 1.486, the 2-year at 1.41 and the 5-year at 1.40. The Federal Reserve Bank recently executed the third of three expected 1/4-point rate cuts in 2019 with further cuts expected in 2020. We are continuing to fill maturity gaps in the ladder to minimize reinvestment risk subject to rates at any one point in time and decreasing variable rate LGIP exposure. Investment Committee review: Finance Director: Date 2- /z/20?-a City Manager: Date