07 Staff Report
PREPARED BY: Stephen Conway
Finance Director
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: 2/18/2020
ITEM NO: 7
DATE: February 13, 2020
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Receive the Second Quarter Investment Report (October through December
2019) for Fiscal Year 2019/20.
RECOMMENDATION:
Receive the Second Quarter Investment Report (October through December 2019) for Fiscal
Year 2019/20.
DISCUSSION:
As of December 31, 2019, the Town’s weighted portfolio yield was 1.93% which trended below
the Local Agency Investment Fund (LAIF) yield of 2.04%. This small yield differential was
primarily due to the LAIF portfolio’s weighted average maturity (WAM) of 173 days and the
Town’s WAM of 641 days. In recent months, staff in consultation with the Town’s investment
advisor have been extending maturities to capture higher yields currently associated with
longer dated securities. Staff continues to replace matured or called investments with similar
investments with respect to maturity and credit quality. For the second quarter, the Town’s
weighted average rate of return decreased by 9 basis points (0.09%) from 2.02% to 1.93%.
During the quarter ending December 31, 2019, the Federal Reserve Open Market Committee
(FOMC) lowered interest rates 25 basis points, targeting a federal funds rate of 1.5% to 1.75%.
For the calendar year, the FOMC lowered rates 25 basis points three consecutive times. At the
conclusion of the final FOMC meeting for 2019, Federal Reserve Chairman Powell stated, “Our
economic outlook remains a favorable one despite global developments and ongoing risks.” In
addition, Chairman Powell stated, “ As long as incoming information about the economy
remains broadly consistent with this outlook, the current stance of monetary policy likely will
remain appropriate.” Therefore, indicating that no further rate reductions would be necessary
for the foreseeable future. This recent Federal action is consistent with staff’s strategy to
extend maturity lengths on new purchases of securities to take advantage of higher yielding
securities in the 2 to 3-year maturity range.
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SUBJECT: Receive the First Quarter Investment Report (October through December 2019)
for Fiscal Year 2019/20
DATE: February 18, 2020
CONCLUSION:
Staff recommends that the Town Council receive the Second Quarter Investment Report
(October through December 2019) for Fiscal Year 2019/20.
Attachment:
1. Second Quarter Investment Report for FY 2019/20 (October through December 2019)