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 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 05/15/2018
ITEM NO: 3
DATE: MAY 6, 2018
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: RECEIVE THE THIRD QUARTER INVESTMENT REPORT (JANUARY THROUGH
MARCH 2018) FOR FISCAL YEAR 2017/18.
RECOMMENDATION:
Receive the Third Quarter Investment Report (January through March 2018) for Fiscal Year
2017/18.
DISCUSSION:
As of March 31, 2018, the Town’s weighted portfolio yield of 1.60% continues to outperform
the Local Agency Investment Fund (LAIF) yield of 1.52% (difference of 8 basis points). For the
quarter, the Town’s weighted average rate of return increased 7 basis points (0.07%) from
1.53% to 1.60%. Cash balances remained steady this quarter due to the receipt of an
apportionment of property taxes that continued into the first quarter of the calendar year.
During the quarter, yields continued to generally increase in anticipation of stronger economic
growth. However, there are signs of some overheating of the economy with consumer
borrowing reaching elevated levels. Wage pressures may be building which could potentially
increase the risk of inflation and higher future interest rates. Political uncertainty at the federal
level is contributing to the volatility, with trade fears and midterm elections on one end, and
tax cuts, deregulation, and repatriation on the other. This uncertainty could keep the Federal
Reserve more cautious, although gradual rate hikes are likely to continue.
Because of the rising interest rate forecast, the Town’s investment strategy continues to focus
on the purchase of new short-term (two years or less in maturity) investments as the rewards
for longer term investments in the three to five year maturity do not have adequate spreads to
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SUBJECT: THIRD QUARTER INVESTMENT REPORT (JANUARY THROUGH MARCH 2018)
FOR FISCAL YEAR 2017/18
MAY 15, 2018
S:\COUNCIL REPORTS\2018\05-15-18\Invesment Report\Staff Report.FINAL.docx 5/10/2018 10:29 AM SLL
DISCUSSION (Cont’d):
justify the risk of holding longer term maturities. As a result, staff continues to replace matured
or called investments with similar investments with respect to maturity and credit quality.
CONCLUSION:
Staff recommends that the Town Council receive the Third Quarter Investment Report (January
through March 2018) for Fiscal Year 2017/18.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
Attachment:
1. Third Quarter Investment Report for FY 2017/18 (January through March 2018)