HomeMy WebLinkAbout2012 12 10 Informational 103 Investment ReportCOMMISSION AGENDA
ITEM 103
December 10, 2012
Regular Meeting
Informational
Consent
X
Public Hearings
Regular
KS
SB
City Manager Department
REQUEST:
The City Manager and the Finance and Administrative Services Department providing the
Investment Report for the fourth quarter of fiscal year 2012 (quarter ending September 30,
2012) as prepared by PFM Asset Management LLC.
SYNOPSIS:
Distribution of the investment report for the fourth quarter of the 2012 fiscal year
(quarter- ending September 30, 2012).
CONSIDERATIONS:
The General City Account portfolio is of high credit quality and maintains adequate
liquidity. The portfolio is invested in Federal Agency, U.S. Treasury and commercial paper
securities. PFM's attached report provides additional information regarding the City's
investment position at September 30, 2012.
FISCAL IMPACT:
The weighted average yield at September 30, 2012 is .33 %. The weighted average yield at
June 30, 2012 was .41 %. This portfolio has an average duration of .95 (just short of one
year).
COMMUNICATION EFFORTS:
This Agenda Item has been electronically forwarded to the Mayor and City Commission,
City Manager, City Attorney /Staff, and is available on the City's Website, LaserFiche, and
the City's Server. Additionally, portions of this Agenda Item are typed verbatim on the
Consent 103 PAGE 1 OF 2 - December 10, 2012
respective Meeting Agenda which has also been electronically forwarded to the individuals
noted above, and which is also available on the City's Website, LaserFiche, and the City's
Server; has been sent to applicable City Staff, Media/Press Representatives who have
requested Agendas /Agenda Item information, Homeowner's Associations /Representatives
on file with the City, and all individuals who have requested such information. This
information has also been posted outside City Hall, posted inside City Hall with additional
copies available for the General Public, and posted at five (5) different locations around the
City. Furthermore, this information is also available to any individual requestors. City Staff
is always willing to discuss this Agenda Item or any Agenda Item with any interested
individuals.
Additionally, the investment report will be placed on the City's website within one week of
acceptance in the section titled Budgets and Financial Documents.
RECOMMENDATION:
Staff requests that the City Commission review and accept the information provided in this
agenda item.
ATTACHMENTS:
Investment Report for quarter- ending September 30, 2012
Consent 103 PAGE 2 OF 2 - December 10, 2012
City of Winter Springs, Florida
Investment Advisors
Steven Alexander, CTP, CGFO, Managing Director
Gregg Manjerovic, CFA, Portfolio Manager
D. Scott Stitcher, CFA, Senior Managing Consultant
Rebecca Geyer, CTP, Senior Analyst
PFM Asset Management LLC
300 S. Orange Avenue, Suite 1170 One Keystone Plaza, Suite 300
Orlando, FL 32801
(407) 648 -2208
(407) 648 -1323 fax
North Front & Market Streets
Harrisburg, PA 17101 -2044
717- 232 -2723
717- 233 -6073 fax
City of Winter Springs, Florida
Investment Report - Quarter Ended September 30, 2012
Table of Contents
Tab I.
Section A Market Review
Tab II.
Section B Executive Summary and General City Account Portfolio Performance
Section C Asset Allocation Chart
Tab III. September 30, 2012 PFM Month -End Statement
(statements are available online at www.pfm.com)
This material is based on information obtained from sources generally believed to be reliable and available to the public,
however PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for
general information purposes only and is not intended to provide specific advice or recommendation. The information
contained in this report is not an offer to purchase or sell any securities.
Table of Contents Section i
City of Winter Springs, Florida Investment Report - Quarter Ended September 30, 2012
TAB I
City of Winter Springs, Florida Investment Report — Quarter Ended September 30, 2012
Summary
• During the third quarter, further easing measures by central banks
around the world spurred investors' demand for riskier assets,
resulting in strong performance for corporate bonds, mortgage -
backed securities, and equities.
• While the U.S. housing recovery seemed to be building
momentum, manufacturing activity and job growth have continued
to show persistent weakness.
• The domestic economy will likely continue its sluggish recovery,
despite uncertainties about the U.S. election and the looming fiscal
cliff.
Economic Snapshot
• The unemployment rate fell to 7.8% in September. The economy
added 437,000 jobs in the third quarter, up from 200,000 in the
prior period.
• The S &P Case - Shiller Index of home prices for July marked a year -
over -year increase that was more than consensus predicted,
reflecting a continued housing recovery.
• The Institute for Supply Management's manufacturing survey fell
slightly below 50 for June, July, and August, indicating a weakening
of the important manufacturing base, but rose to 51.5 in
September, suggesting slow growth (A measure above 50 is the
dividing point between growth and expansion.)
• The Consumer Price Index increased by 0.6% in August on a
seasonally adjusted basis, its largest gain since June 2009; this was
primarily due to increases in food and energy prices.
• Most economists expect U.S. gross domestic product (GDP) to
grow by only 1.8% to 2% for the year.
Interest Rates
• Interest rates ended the quarter modestly lower, while yield
spreads on Federal Agencies, corporates, and mortgage- backed
securities (MBS) tightened significantly.
• Long -term Treasury yields experienced significant intra - quarter
volatility, while two -year Treasury yields remained in a tight range
of 0.20% to 0.30% for the quarter.
• The Federal Reserve announced that it will keep short -term rates
at extremely low levels through mid -2015. It also initiated a third
round of Quantitative Easing (QE3), a new program to purchase
$40 billion in agency MBS each month until economic conditions
improve.
Sector Performance
• Accommodative measures by global central banks gave investors
confidence in the prospects for economic growth. The resulting
shift from Treasuries and Agencies to high - quality corporate bonds
helped corporate bonds to outperform. Bonds issued by financial
firms did particularly well, outpacing those in the industrial and
utility sectors.
• Supported by the new QE3 purchase program, Agency MBS
performed well, but returns were tempered as a result of
increased pre - payments, which shortened their average lives.
• While the Municipal sector lagged the corporate sector, it
generated returns in excess of Treasuries and Agencies, and
offered the additional value of diversification.
• Supply reductions should keep Agency spreads narrow, as Fannie
Mae and Freddie Mac reduce their retained portfolios by 15% per
year, as mandated by the Treasury Department.
The views expressed within this material constitute the perspective and judgment of PFM Asset Management LLC ( PFMAM) at the time of distribution and are
subject to change. Information is obtained from sources generally believed to be reliable and available to the public; however, PFMAM cannot guarantee its
accuracy, completeness, or suitability. This material is for general information purposes only and is not intended to provide specific advice or
recommendation. The information contained in this report is not an offer to purchase or sell any securities.
PFM Asset Management LLC
Section A -1
City of Winter Springs, Florida
Investment Report - Quarter Ended September 30, 2012
Economic Snapshot
Labor Market
Latest
Jun 2012 Sep 2011
Unemployment Rate
Average Hourly Earnings (YoY)
Personal In
Initial Jobless Claims
Sep 7.8% 8.2% 9.0%
202,000
Sep 1.8% 2.0% 2.0%
Oct 12 388,000 376,000 402,000
Unemployment Rate (left) vs. Change in Nonfarm Payrolls (right)
600K
400K
200K
8 0% - 0
7.0% - -200K
6.0% _ - - - -400K
9/30/09 3/31/10 9/30/10 4/30/11 10/31/11 4/30/12
Growth
Real GDP (QoQ SAAR)
GDP Personal Consumption
Retail Sales (YoY)
ISIVI Manufacturing Su
tY;
Existing Home Sales (millions)
IoQ SAAR;
Q2
Sep
Sep
Sep
1.3%
1
5.4%
51.5
4.75
2.0 %1
2.4r
3.5%
.7
4.37
1.3%
8.3%
52.5,
4.28
5.0 %.
4.0%
3.0%
2.0%
1.0%
00%
1.0%
Real GDP (QoQ)
6/30/09 12/31/09 6/30/10 12/31/10 6/30/11 12/31/11 6/30/12
Inflation / Prices
Personal Consumption Expenditures (YoY) Aug 12
Consumer Price Index Core (YoY)
Crude Oil Futures (1 {TI, per barrel)"
Gold Futures (oz)
Sep 12
ep
1.5%
2.1%
Sep 30 $1,771
1.5%
0.7%
4.
$1,604
2.9%
7.0%
79.20
$1,620
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
1.0%
2.0%
Consumer Price Index
8/31/09 2/28/10 8/31/10 3/31/11 9/30/11 3/31/12
1. Data as of First Quarter 2012
Note: YoY = year over year, QoQ = quarter over quarter, SAAR = seasonally adjusted annual rate, WTI = West Texas Intermediate crude oil
Source: Bloomberg
PFM Asset Management LLC
Section A -2
City of Winter Springs, Florida
Investment Report — Quarter Ended September 30, 2012
3.0 %-
2.5%
2.0%
a 1.5%
1.0%
0.5%
Interest Rate Overview
U.S. Treasury Note Yields
,
0.0%
9/30/11 11/30/11 1/31/12 3/31/12 5/31/12 7/31/12 9/30/12
2 -Year 5 -Year
U.S. Treasury Note Yields
10 -Year
Maturity 9/30/12 6/30/12
3 -month
-yea
2 -year
-yex
10 -year
-year
0.12%
0.16'
0.25%
0.6
1.70%
2.82°
0.11%
0
0.32%
0.75°
1.73%
2.78°
Change
over
Quarte r
0.00%
9/30/11
0.02%
0.17°
0.28%
0.96!
2.01%
2.95
Change
over Year
0.09%
Source: Bloomberg
4%
U.S. Treasury Note Yield Curve
0%
361 2 3 5 7 10
rmYYY Y Y Y
4%
3%
>_ 2%
1%
0%
30
Maturity
September 30, 2012 = ° = June 30, 2012 September 30, 2011
Yield Curves as of 9/30/12
Y
361 2 3 5 7 10
nTnY Y Y Y Y Y
Maturity
U.S. Treasury - - - -- Federal Agency Industrial Corporates, A Rated
25
Y
30
Y
PFM Asset Management LLC
Section A -3
City of ViiLter Springs, Florida
Investment Report - Quarter Ended September 30, 2012
B of A Merrill Lynch Index Returns
As of 9/30/2012
Periods Ended 9/30/2012
1-3 Year Indices
U.S. Treasury
Federal Agency
U.S. Corporates, A-AAA Rated
Agency MBS (0 to 3 years)
Municipals
1-5 Year Indices
U.S. Treasury
Federal Agency
U.S. Corporates, A-AAA Rated
Agency MBS (0 to 5 years)
Municipals
Master Indices
U.S. Treasury
Federal Agency
U.S. Corporates, A-AAA Rated
Agency MBS
Municipals
Duration
1.89
1.60
1.98
1.78
1.84
2.74
2.24
2.79
1.83
2.59
6.05
3.69
6.78
1.82
7.39
Yield
0.25%
0.31%
1.02%
0.87%
0.52%
0.34%
0.42%
1.26%
0.91%
0.71%
0.91%
0.79%
2.38%
0.92%
2.48%
3 Month
0.26%
0.25%
1.50%
0.91%
0.33%
0.47%
0.46%
2.18%
1.08%
0.62%
0.58%
0.84%
3.53%
1.13%
2.51%
1 Year
0.56%
0.92%
4.10%
2.29%
1.33%
1.29%
1.53%
5.92%
3.63%
2.23%
3.19%
2.83%
9.97%
3.74%
8.96%
3 Years
1.43%
1.58%
3.63%
3.78%
1.75%
2.58%
2.29%
4.98%
4.73%
2.65%
5.46%
3.95%
8.26%
5.06%
6.20%
Returns for periods greater than one year are annualized
3 Month return is periodic
Source: Bloomberg
PFM Asset Management LLC
Section A-4
City of Winter Springs, Florida Investment Report - Quarter Ended September 30, 2012
TAB II
City of Winter Springs, Florida
Investment Report - Quarter Ended September 30, 2012
Executive Summary
PORTFOLIO STRATEGY
➢ The City's General City Account Portfolio is of high credit quality and invested in Federal Agency, U.S. Treasury, and commercial
paper securities.
➢ The General City Account Portfolio continues to provide the City with favorable yield relative to the benchmark. At quarter end the
portfolio had a Yield to Maturity at Cost of 0.37 %, exceeding the Yield to Maturity of its benchmark the Merrill Lynch 1 Year U.S.
Treasury Note Index by 19 basis points (0.19 %).
➢ Bond yields remained highly correlated with headlines out of Europe. Weakening economic conditions in the Eurozone triggered a
flight -to- quality that drove intermediate -term Treasury yields to new all -time record lows in July. The development of an European
Central Bank ( "ECB ") sovereign debt purchase program reversed the trend, causing yields to rebound sharply. Despite several
periods of sharp temporary yield movements, Treasury yields ended the quarter only modestly lower in most maturities.
➢ Agency notes received a boost during the quarter when the Treasury Department accelerated the wind down of Fannie Mae's and
Freddie Mac's investment portfolio holdings, an action which will shrink Agency bond and discount note supply by $1 trillion over
the next few years.
➢ With the ECB's sovereign debt support program in place, we are turning our attention away from Europe and focusing on domestic
issues, such as U.S. economic conditions, the upcoming election and the looming fiscal cliff, and other global issues, like the
troubling slowdown in China and turmoil in the Middle East. These conditions create uncertainties that are hard to handicap, and
virtually impossible to predict with any degree of certainty.
➢ With central banks around the globe pumping an unprecedented amount of liquidity into the market and embarking on new large
scale bond purchase programs, we are faced with a scenario of more dollars chasing fewer assets. As a result, our outlook for
most "spread sectors" remains positive.
➢ As always, we strive to maintain the safety of principal, while at the same time seeking opportunities to add value. Our strategy will
remain flexible and may change in response to changes in interest rates, economic data, market outlook or specific opportunities
that arise.
PFM Asset Management LLC Section B - 1
City of Winter Springs, Florida
Investment Report - Quarter Ended September 30, 2012
The City's Investment Statistics
Account Name
General City Account Portfolio
Fidelity Institutional Money Market Fund Government Portfolio (Fund #257)
Money Market Fund - State Board of Administration Pool A
Money Market Fund - State Board of Administration Pool B
Bank of America Cash for Operation - depository
Water & Sewer 2000 - Fidelity Institutional Money Market Fund Government Portfolio (Account #364)
Water & Sewer 2000 - Money Market Fund - State Board of Administration Pool A
Water & Sewer 2000 - Money Market Fund - State Board of Administration Pool B
Total
Amortized Cost' ,"
September 30, 2012
$23,830,926.22
910,279.14
7.86
511,616.90
2,319,251.50
716,731.55
0.22
14,848.51
$28,303,661.90
Amortized Cost' 2a
June 30, 2012
$26,159,249.53
42, 670.22
24, 019.50
541, 030.03
2, 419, 929.76
716, 712.48
697.12
15, 702.15
$29,920,010.79
Market Value',"
September 30, 2012
$23,854,238.40
910,279.14
7.86
511,616.90
2,319,251.50
716,731.55
0.22
14,848.51
$28,326,974.08
Market Value'2a
June 30, 2012
$26,184,497.07
42, 670.22
24, 019.50
541, 030.03
2, 419, 929.76
716, 712.48
697.12
15, 702.15
$29,945,258.33
Account Name
General City Account Portfolio
Fidelity Institutional Money Market Fund Government Portfolio (Fund #257)
Money Market Fund - State Board of Administration Pool A
Money Market Fund - State Board of Administration Pool B
Bank of America Cash for Operation - depository
Water & Sewer 2000 - Fidelity Institutional Money Market Fund Government Portfolio (Account #364)
Water & Sewer 2000 - Money Market Fund - State Board of Administration Pool A
Water & Sewer 2000 - Money Market Fund - State Board of Administration Pool B
Weighted Average Yield
Duration (Years)
September 30, 2012
0.94
0.003
39 Days
N/A
0.003
0.003
39 Days
N/A
Yield to Maturity Yield to Maturity Yield to Maturity Yield to Maturity
on Cost' on Cost° at Market at Market Duration (Years)
September 30, 2012 June 30, 2012 September 30, 2012 June 30, 2012 June 30, 2012
0.37% 0.44% 0.24% 0.28% 0.95
0.01% 0.01% 0.01% 0.01% 0.003
0.31% 0.31% 0.31% 0.31% 38 Days
0.00% 0.00% 0.00% 0.00% N/A
0.25% 0.25% 0.25% 0.25% 0.003
0.01% 0.01% 0.01% 0.01% 0.003
0.31% 0.31% 0.31% 0.31% 38 Days
0.00% 0.00% 0.00% 0.00% N/A
0.33% 0.41% 0.22% 0.27
Benchmarks
Merrill Lynch 1 Year U.S. Treasury Note Index'
Notes:
1. On a trade -date basis, including accrued interest.
2. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances.
3. Excludes any money market fund/cash balances held in custodian account.
4. Past performance is not indicative of future results.
5. Source Bloomberg.
PFM Asset Management LLC
September 30, 2012
0.18%
June 30, 2012
0.24
Section B - 2
City of Winter Springs, Florida
Investment Report - Quarter Ended September 30, 2012
General City Account Portfolio Composition and Credit Quality Characteristics
Security Type'
U.S. Treasuries
Federal Agencies
Commercial Paper
Certificates of Deposit
Bankers Acceptances
Repurchase Agreements
Municipal Obligations
Corporate Notes /Bonds
Corporate Notes /Bonds - FDIC Insured
Mortgage Backed
Money Market Fund /Cash
September 30, 2012 % of Portfolio
$14,532,193.67 60.92%
6,424,248.63 26.93%
2,897,796.10 12.15%
0.00 0.00%
0.00 0.00%
0.00 0.00%
0.00 0.00%
0.00 0.00%
0.00 0.00%
0.00 0.00%
0.00 0.00%
June 30, 2012
$15,059,825.64
8,320,442.58
2,804,228.85
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
OA
of Portfolio
57.51%
31.78%
10.71%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
Totals
$23,854,238.40
100.00%
i
U.S.
Treasuries
61%
Portfolio Composition
as of 09/30/12
Commercial
Paper
12%
Federal
Agency
Obligations
27%
$26,184,497.07
100.00%
AA+
88%
Credit Quality Distribution2
as of 09/30/12
A -1+ (Short -
term)
5%
A -1 (Short -
term)
7%
Notes:
1. End of quarter trade -date market values of portfolio holdings, including accrued interest.
2. Credit rating of securities held in portfolio, exclusive of money market fund /LGIP. Standard & Poor's is the source of the credit ratings.
PFM Asset Management LLC
Section B - 3
City of Winter Springs, Florida
Investment Report - Quarter Ended September 30, 2012
General City Account Portfolio Maturity Distribution
Maturity Distribution' September 30, 2012 June 30, 2012
Overnight (Money Market Fund) $0.00 $0.00
Under 6 Months 6,326,956.42 3,234,407.40
6 - 12 Months 0.00 10,511,056.45
1 - 2 Years 17,527,281.98 12,439,033.22
2 - 3 Years 0.00 0.00
3 - 4 Years 0.00 0.00
4 - 5 Years 0.00 0.00
5 Years and Over 0.00 0.00
Totals
$23,854,238.40 $26,184,497.07
Percentage of Total Portfolio
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
27%
12%
0% 0%
0%
Overnight
Portfolio Maturity Distribution'
73%
48%
❑ September 30, 2012
❑ June 30, 2012
0% 0% 0% 0% 0% 0% 0% 0%
Under 6 Months 6 - 12 Months 1 - 2 Years 2 - 3 Years
3 - 4 Years 4 - 5 Years
Notes:
1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity.
5 Years and Over
w0
PFM Asset Management LLC Section B - 4
J
City of Winter Springs, Florida'
Security Type' September 30, 2012 September 30, 2012 Notes Permitted by Policy
United States Treasury Securities 14,516,462.99 52.65%
United States Government Agency Securities - 0.00%
Federal Instrumentalities 6,417,428.59 23.28%
Mortgage - Backed Securities - 0.00%
Certificates of Deposit - 0.00%
Repurchase Agreements - 0.00%
Commercial Paper 2,897,034.64 10.51%
Corporate Notes - FDIC Insured - 0.00%
Bankers' Acceptances - 0.00%
State and /or Local Government Debt (GO and Revenue) - 0.00%
Money Market Mutual Funds 1,421,903.90 5.16%
Intergovernmental Investment Pool - 0.00%
Bank of America Cash for Operation 2,319,251.50 8.41%
2
100%
75%
80%
0%
25%
50%
30%
50%
30%
20%
100%
25%
100%
Asset Allocation as of September 30, 2012
Asset Allocation
as of September 30, 2012
Federal lnstr unentalties
2328%
Individual Issuer Breakdown September 30, 2012 September 30, 2012 Notes Permitted by Policy Individual Issuer Breakdown
Government National Mortgage Association (GNMA)
US Export-Import Bank (Ex -Im)
Farmers Home Administration (FMHA)
Federal Financing Bank
Federal Housing Administration (FHA)
General Services Administration
New Communities Act Debentures
US Public Housing Notes & Bonds
US Dept. of Housing and Urban Development
Federal Farm Credit Bank (FFCB)
Federal Home Loan Bank (FHLB)
Federal National Mortgage Association (FNMA)
Federal Home Loan Mortgage Corporation (FHLMC)
Notes:
1. Does not include bond proceeds.
2. Managed by the City.
3 End of month trade -date amortized cost of portfolio holdings, including accrued interest.
PFM Asset Management LLC
4,898,228.25
1,519,200.34
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
17.77%
5.51%
50%
50%
50%
50%
50%
50%
50%
50%
50%
25%
25%
25%
25%
September 30, 2012
September 30, 2012 Notes Permitted by Policy
Bank of Tokyo Mitsubishi CP
Toyota CP
Fidelity Institutional Money Market Fund Government Portfolio (Fund #257)
Money Market Fund - Florida Prime (SBA)
Money Market Fund - Florida SBA Fund B
1,598,469.33 5.80%
1,298,565.31 4.71%
910,279.14 3.30%
7.86 0.00003%
511,616.90 1.86%
2
2
2
10%
10%
25%
25%
N/A
Section C - 1