02 Staff Report.Investment Report 1st Quarter 20-21
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: 11/17/2020 ITEM NO: 2
DATE: November 11, 2020
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Receive the First Quarter Investment Report (July through September 2020)
for Fiscal Year 2020/21.
RECOMMENDATION:
Receive the First Quarter Investment Report July through September 2020) for Fiscal Year
2020/21.
DISCUSSION:
As of September 30, 2020, the Town’s weighted portfolio yield was 1.86% which trended above
the Local Agency Investment Fund (LAIF) yield of 0.69%. This favorable yield differential was
primarily due to the LAIF portfolio’s weighted average maturity (WAM) of 169 days and the
Town’s longer WAM of 556 days. The Town’s weighted average rate of return of 1.86% for the
first quarter remained stable relative to the first quarter return of 2.02% in 2019.
In the months prior to the COVID-19 outbreak, staff in consultation with the Town’s investment
advisor had been extending maturities to capture higher yields currently associated with longer
dated securities. In recent months, the economic fallout associated with the pandemic has led
to Treasury yields falling dramatically. For example on September 30, 2020, ten-year US
Treasury notes were yielding 0.69% versus 1.69% on September 30, 2019.
During the first quarter, staff in coordination with the Town’s investment advisor started
investing most maturing investments into the State Local Agency Investment Fund (LAIF) pool
to capture the higher short-term yields. The State LAIF pool typically lags the market when
current market yields are either increasing or decreasing. However, with LAIF’s WAM of 169
days, staff is expecting a steady decline in LAIF portfolio yields until the LAIF portfolio reflects
the low short-term investment yields available in the market.
PAGE 2 OF 2 SUBJECT: Receive the First Quarter Investment Report (July through September 2020) for Fiscal Year 2020/21 DATE: November 11, 2020
The Federal Reserve (Fed) projects no change to its policy until late 2023. The Fed said it is
committed to keeping the target range for the federal funds rate at 0% to 0.25% until “labor
market conditions have reached levels consistent with the Committee's assessment of
maximum employment
CONCLUSION:
Staff recommends that the Town Council receive the First Quarter Investment Report (July
through September 2020) for Fiscal Year 2020/21.
Attachment:
1. First Quarter Investment Report for FY 2020/21 (July through September 2020)