Staff Report
PREPARED BY: STEPHEN CONWAY
DIRECTOR OF FINANCE
Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● 406-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 08/20/2019 ITEM NO: 3
DATE: August 9, 2019
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Receive the Fourth Quarter Investment Report (April through June 2019) for
Fiscal Year 2018/19
RECOMMENDATION:
Receive the Fourth Quarter Investment Report (April through June 2019) for Fiscal Year
2018/19.
DISCUSSION:
As of June 30, 2019, the Town’s weighted portfolio yield of 2.05% is trending below the Local
Agency Investment Fund (LAIF) yield of 2.43%. This difference is primarily due to the LAIF
portfolio’s weighted average maturity (WAM) of 173 days being below the Town’s WAM of 244
days. With the recent occasional inversion of the yield curve (short term rates higher than long
term rates), it is not unusual in the short run for LAIF yields to outperform portfolios that have a
longer average maturity. Staff continues to replace matured or called investments with similar
investments with respect to maturity and credit quality. For the fourth quarter, the Town’s
weighted average rate of return increased 11 basis points (0.11%) from 1.94% to 2.05%.
For the quarterly period ending June 30, 2019, interest rates decreased across the yield curve
fueled by a softening in some economic indicators, continuing trade tensions, and public
comments by the Federal Reserve. Responding to this trend, staff’s strategy is to replace
current maturities with shorter term investments (1 to 3 years) because the market is not
offering much advantage in terms of locking in longer term (3 to 5 years) maturities. As
previously noted, the market is currently experiencing an inverted yield curve with the Three-
Year US Treasury Note yielding a return of 1.567% while the Five-Year US Treasury Note yields
1.563%.
PAGE 2 OF 2 SUBJECT: Receive the Fourth Quarter Investment Report (April through June 2019) for Fiscal
Year 2018/19 DATE: August 9, 2019
CONCLUSION:
Staff recommends that the Town Council receive the Fourth Quarter Investment Report (April
through June 2019) for Fiscal Year 2018/19.