Staff ReportPREPARED BY: STEVE CONWAY
Finance Director/Town Treasurer
Reviewed by: Assistant Town Manager Town Attorney Finance
N:\SHARE\COUNCIL REPORTS\2016\08-02-16\03 Invest Report 4th Quarter\FINAL Staff Report - 4th Quarter Investment Report.doc
MEETING DATE: 08/2/16
ITEM NO: 3
COUNCIL AGENDA REPORT
DATE: JULY 15, 2016
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: APPROVE FOURTH QUARTER INVESTMENT REPORT (APRIL THROUGH
JUNE 2016) FOR FISCAL YEAR 2015/16
RECOMMENDATION:
Approve the attached Fourth Quarter Investment Report (April through June 2016) for Fiscal Year
2015/16.
DISCUSSION:
Attached for Council consideration and approval is the Fourth Quarter Investment Report for FY
2015/16, for the period April through June 2016.
The Town’s weighted portfolio yield of 0.85% is still outperforming the Local Agency Investment
Fund (LAIF) yield of 0.57% (difference of 28 basis points). Therefore, 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 from 0.75% rate
earned in the third quarter.
In mid-December 2015, for the first time since before the financial crisis in 2008, the Federal Open
Markets Committee (FOMC) raised the Fed funds target rate. The Committee increased its benchmark
rate 0.25% to a range of 0.25% to 0.50%. Despite this action, interest rates fell across most of the
maturity spectrums over the first quarter of 2016. The FOMC voted to maintain its Fed funds target
rate at 0.25% to 0.50% at their June 2016 meeting. The Federal Reserve governors indicated that the
economy may warrant an interest rate increase as some point this summer; however, the Federal
Reserve meeting took place before the United Kingdom voted to exit the European Union, which led to
increased market volatility and uncertainty. Employment growth slowed in the quarter with May being
the weakest month for job creation in the last five years. The unemployment rate of 4.7% has
decreased by more than 50% since its high in October, 2009. The market expected interest rates to
increase in 2016, but due to market uncertainty, an increase in the fall of 2016 appears unlikely.
Staff is concentrating on short-term (two years or less in maturity) for its new investments with a
potential shift from treasuries as they mature to high quality corporate medium term notes (higher yield
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: APPROVE FOURTH QUARTER INVESTMENT REPORT (APRIL THROUGH
JUNE 2016) FOR FISCAL YEAR 2015/16
JULY 15, 2016
DISCUSSION (Cont’d):
while preserving safety of principal) as the rewards for longer term investments in the three to five year
maturity do not have adequate spreads to justify the risk of holding longer term maturities.
Attachment:
1. Fourth Quarter Investment Report for FY 2015/16 (April through June 2016)
ATTACHMENT 1