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06/15/2021 04C May 2021 Investment Transactions Report ti i..asxntntj kd d g$Ag aY ae.. x°'naa.x,,4n BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 4.C. For Meeting of: June 15, 2021 ITEM TITLE: May2021 Investment Transactions Report SUBMITTED BY: Steve Groom, Director of Finance and Budget SUMMARY EXPLANATION: This monthly Investment Transactions 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. Each investment is in full compliance with the City's Investment Policy, State Statues and the City's Municipal Code. 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 CI ay in st ent re rt 12/2021 r Memo 2 FINANCE DATE: June 1 , 2021 TO: Mayor and City Council FROM: Steve Groom, Finance Director RE: May 2021 Investment Transactions The investment transactions for May 2021 were: Matured: • none Called: • none Purchased: • $2,000,000 US Treasury to mature July 31 , 2024 The investment purchase in May fills a maturity gap in a shortened (3-year maturity horizon, instead of 5-year pre-COVID) ladder to minimize reinvestment risk subject to rates at any one point in time and hedging against further decreasing rate exposure. In 2020, the city had several callable maturities called, the proceeds of which were put in the LGIP state pool. Reinvesting those maturities has been spread over several months in order to spread the reinvestment risk, the risk of reinvesting at prevailing rates during any one time. During the current market volatility, the range of investment options for 1- to 3- year maturities during May fluctuated slightly, as the 1-year Treasury yield ranged between 0.04% to 0.06%. The 3-year area of the yield curve hovered between 0.29% and 0.35%. The LGIP 30-day yield was 0.09 at 5/1 and 0.07% at 5/31 . 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 -1-4111M116 1...1 ) A... FINANCE Committee Review of Investment Rationale Date: May 18, 2021 Investment # 2021-1563 is a 3-year US Treasury (UST), face value $2,000,000, maturing July 31, 2024, 2.125% coupon at 105-20 to yield 0.351%. This trade settles May 19, 2021 with Wedbush Securities, US Bank Safekeeping, reducing our elevated LGIP position caused by maturities called during 2020. Liquidity: At April 30th, month-end, Key Bank checking account balance was $4.8 million (target minimum is $3 Million), US Bank checking balance was $6.8 million and investment portfolio was $38.0 million (target is $64 million for Treasuries, Corporates and Agencies). Current LGIP balance was $45.9 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 0.35%. This investment is 27 basis points over LGIP, seeking to protect yield in an uncertain environment. LGIP's yield is expected to stay level over the next year. Comparable yields are: LGIP current 30-day yield 0.080712% www.secureaccess.wa. ov 3-year corporate Unavailable in AA Treasury.gov 3-year Agency 0.3500% Broker daily runs Callability. This investment is not callable (a bullet). Diversification. This purchase brings this issuer to 10.8% of total portfolio. This purchase adds a maturity date previously not covered to city's laddered portfolio. Outlook. The yield curve is currently low and flat; the 1-year Treasury at 0.04%, the 2- year at 0.16% the 3-year at 0.34%, and the 5-year at 0.84%. The Federal Reserve Bank has been keeping rates low with uncertainty of a 2022 rate hike increasing. By filling maturity gaps in a shortened 3-year ladder, we minimize reinvestment risk subject to rates at any one point in time and hedging against further decreasing rate LGIP exposure. Investment Committee review: ---:-- ,..,..__ Finance Director: Date I /tic? 227( City Manager: - Date L3-17--1 iz-62--f 4 i.r lij " FINANCE Prior to COVID, a year ladder was employed, making the portfolio stable, predictable and forecastable. Due to sub-1%rates, purchases are now shortened to fill maturity gaps in a 3-year ladder to avoid locking in lower rates longer. At$2m per month, the current goal is to ladder out$60M fairly evenly. City of Yakima Enyestrnelt Portfolio tv*.attirity�_;is#r,6.ution -Aar 30,2021 S2,.Cc CC $-,3 V;Mom'. S'-.' ! auCti ti City Of Yakima Diver by Issuer-Apr 30,2021 Treasii 000s . a FAMCA, S5,000,000,6% F r. . '4:.;<<r.�':. FNMA: $3,000,000,3% FH3MC, $1,000,OQ0,155 .. Apple, $1,000,000,1% MM . :::::::::::::::::::::::: :::::::::.. xrrrrrrrrrrr.:rrrrrrrrrrrr.::.. ::::: ::::::::::: :::::::::::: . .....::::..::::.... U56anrora, $1,000,000.SSf - .... .. Walmart 104(1000 195 Microsoft 1 DOa,OO6 1% Hj3.:^i:^y;J 5/18/2021 p.2 of 4 2021-1563 Invest Rationale UST 07-2024