Staff Report.Investment Report 1st Quarter 21-22
PREPARED BY: Stephen Conway
Finance Director
Reviewed by: Town Manager and Assistant Town Manager
110 E. Main Street Los Gatos, CA 95030 ● 406-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
FINANCE COMMISSION REPORT
MEETING DATE:11/16/2021 ITEM NO: 14
DATE: November 10, 2021
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Receive the First Quarter Investment Report (July through September 2021)
for Fiscal Year 2021/22.
RECOMMENDATION:
Receive the First Quarter Investment Report (July through September 2021) for Fiscal Year
2021/22
DISCUSSION:
This Investment Report was provided to the Finance Commission on November 8, 2021.
As of September 30, 2021, the Town’s weighted portfolio yield was 1.27% which trended above
the Local Agency Investment Fund (LAIF) yield of 0.21%. This favorable yield differential to LAIF
was primarily due to the LAIF portfolio’s lower weighted average maturity (WAM) of 321
days versus the Town’s longer WAM of 519 days. The Town’s weighted average rate of return
of 1.27% at the close of the first quarter was 59 basis points lower when compared to the first
quarter return of 1.86% in 2020.
In the Fourth quarter, LAIF yields continued their steady decline each month for the year. Staff
in coordination with the Town’s investment advisor primarily replaced maturing investments in
shorter term maturities in the two- to three-year maturity range. These investments capture
current yields that exceed the rates expected to be earned in the State Local Agency
Investment Fund (LAIF) pool during that same time period. The State LAIF pool typically lags
the market when current market yields are either increasing or decreasing.
At the conclusion of their November meeting, the Federal Reserve (Fed) announced a slowing
(referred to by the Fed as a “taper”) of its policy of buying back US Treasuries and agencies,
PAGE 2 OF 2 SUBJECT: Receive the First Quarter Investment Report (July through September 2021) for Fiscal Year 2021/22 DATE: November 10, 2021
DISCUSSION (continued):
stating “moderation in the pace of asset purchase may soon be warranted”. In addition, the
Fed left the target range for the federal funds rate at zero to ¼ percent. The Fed raised its
inflation forecast from 3.4% to 4.2% for 2021 and from 2.1% to 2.2% for 2022, and above its 2%
target through 2024. Nonetheless, the Fed Committee’s ‘dot plot’ still reflected a majority
expectation of no rate hikes until 2023.
CONCLUSION:
Staff recommends that the Town Council receive the First Quarter Investment Report (July
through September 2021) for Fiscal Year 2021/22.
Attachment:
1. First Quarter Investment Report for FY 2021/22 (July through September 2021)