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The U.S. economy has grown at a healthy
pace and is expected to measure at a growth rate of 3.5% - 4.0% for
2004. The forecast, however, for 2005 is for slower growth as the
economy began to show signs of a slowdown. After reaching
historically low rates in 40 years, the Federal Reserve began its
tightening cycle and seems to be determined to raise short-term interest
rates. Oil and threat of terrorism continue to add considerable
uncertainty to both economic and inflation outlook and the financial
markets remain sensitive to foreign demand for U.S. Treasuries.
Inflation will likely begin heading higher as the price of oil continues
to increase, but core inflation is expected to remain under control.
Despite a period of historic low interest rates, the City's portfolios
generated superior yields and remained very safe, liquid and in compliance
with the City's Investment Policy and the State Government Code. As
of June 30, 2004 the total investments, including bond proceeds, directly
managed by the City were $561.9 million.
The City's two largest portfolios are the pooled investment portfolio and
the power reserve portfolio. As of June 30, 2004 these two
portfolios represented approximately 75% of the City's total
investments.
|
FY2002 |
FY2003 |
FY2004 |
| Market
value in millions |
$210 |
$248 |
$280 |
| Average
duration in years |
2.22 |
2.17 |
2.23 |
| Effective
Yield* |
4.93% |
4.17% |
2.89% |
| Rate
of Return* |
5.83% |
4.27% |
0.76% |
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| Average
3 Effective Yield |
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4.0% |
| Average
3 year return LAIF State Treasurer's pool |
2.37% |
|
FY2002 |
FY2003 |
FY2004 |
| Market
value in millions |
$160.5 |
$151 |
$142 |
| Average
duration |
3.04 |
3.81 |
4.76 |
| Effective
Yield* |
5.92% |
5.40% |
4.35% |
| Rate
of Return* |
7.49% |
5.45% |
1.86% |
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| Average
3 year Effective Yield |
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5.22% |
| Average
3 year return LAIF State Treasurer's pool |
2.37% |
Legend
Fed agencies: Federal Agency or United States government-sponsored
enterprise obligations, participations, or other instruments, including
those issued by or fully guaranteed as to principal and interest by federal
agencies or United States government-sponsored enterprises.
MMF: Money Market Fund.
Repo: Repurchase Agreements. A purchase or securities by a local
agency pursuant to an agreement by which the counterparty seller will
repurchase the securities on or before a specified date and for a specified
amount.
CD: Certificates of Deposit issued by nationally or state chartered banks or
state or federal savings institutions.
LAIF: Local Agency Investment Fund. An investment pool managed by the
State of California.
Muni: Municipal securities, bonds, notes, warrants or other evidences of
indebtedness of any local agency within the state, including bonds payable
solely out of the revenues from a revenue-producing property owned,
controlled, or operated by the local agency.
Fed Disc: Federal Discount securities.
Asset back: Asset backed securities. Consumer receivable backed bonds
and consumer pass-through certificates of a maximum 5 year maturity.
Corp Bond: Corporate Bonds. Debt issued by corporations organized and
operating within the United States.
CP: Commercial Paper. Short-term financial instruments with a maturity
date not exceeding nine months.
MBS/GNMA: Mortgage-backed securities including mortgage pass-through
securities and collateralized mortgage obligations.
*Effective Yield:
Earnings rate excluding unrealized gains and losses
*Rate of Return: Total return. Earnings
rate including unrealized gains and losses
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