Staff Report
PREPARED BY: STEPHEN CONWAY
FINANCE DIRECTOR
Reviewed by: Town Manager, Interim Assistant Town Manager, and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 05/16/2017
ITEM NO: 3
DATE: MAY 8, 2017
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: RECEIVE THE THIRD QUARTER INVESTMENT REPORT (JANUARY THROUGH
MARCH 2017) FOR FISCAL YEAR 2016/17.
RECOMMENDATION:
Receive the Third Quarter Investment Report (January through December 2017) for Fiscal Year
2016/17.
DISCUSSION:
As of March 31, 2017 the Town’s weighted portfolio yield of 0.98% continues to outperform the
Local Agency Investment Fund (LAIF) yield of 0.82% (difference of 16 basis points). As a result,
staff continues to replace matured or called investments with similar investments with respect
to maturity and credit quality. For the quarter, the Town’s weighted average rate of return
increased 10 basis points (0.10%) from 0.88% to 0.98%.
The meeting of the Federal Open Market Committee (FOMC) concluded on March 15, 2017
with the generally anticipated decision to increase the federal funds rate 25 basis points (i.e.
0.25%). The FOMC statement retained language indicating future increases in the federal funds
target rate would be “gradual.” Early April 2017 indicators included rising interest rate yields
on the 10-Year Treasury, an indication that investors are bracing for faster than expected
growth of the US economy which would likely trigger faster than expected increases to interest
rates.
Because of the rising interest rate forecast, staff’s strategy is to continue focusing on the
purchase of new short-term (two years or less in maturity) investments as the rewards for
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SUBJECT: RECEIVE THIRD QUARTER INVESTMENT REPORT (JANUARY THROUGH MARCH
2017) FOR FISCAL YEAR 2016/17
DATE: MAY 8, 2017
S:\COUNCIL REPORTS\2017\05-16-17\Investment Report\Staff Report FINAL.docx 5/11/2017 8:44 AM SLL
DISCUSSION (cont’d):
longer term investments in the three to five year maturity do not have adequate spreads to
justify the risk of holding longer term maturities.
CONCLUSION:
Staff recommends that the Town Council receive the Third Quarter Investment Report (January
through March 2017) for Fiscal Year 2016/17.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
Attachments:
1. Third Quarter Investment Report for FY 2016/17 (January through March 2017)