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HomeMy WebLinkAboutCouncil Presentation 02/16/2021-Marana 4Q20 Council Report© PFM 0© PFM 0© PFM 0 Town of Marana Investment Portfolio SummaryQuarter Ending December 31, 2020 PFM Asset Management LLC 1820 East Ray Road Chandler, AZ 85225 855-885-9621 pfm.com Luke Schneider, CFA, Director Annette Gaston, Senior Managing Consultant © PFM 1© PFM 1© PFM 1 AA+ 57% AAAm 43% Credit Quality (S&P Ratings) Executive Summary1,2 Account Summary Beginning Values of 9/30/20 Ending Values as of 12/31/20 Market Value $42,068,891 $43,262,962 Book Value $41,666,300 $42,940,296 Unrealized Gain/(Loss)$402,592 $322,666 Weighted Average YTM at Market 0.15%0.13% Weighted Average YTM at Cost 1.11%0.91% Maturity Distribution Town of Marana as of 12/31/20 1.Market Value and Book Value include $18,574,866 invested with the State Local Government Investment Pools 5 & 7 as of 12/31/2020. 2.Weighted average maturity includes LGIP balances and uses book values for weighting. Accrued interest and cash balances are excl uded. 54.9% 4.8% 19.0%21.3% 0.0% 0.0% 1 0. 0% 2 0. 0% 3 0. 0% 4 0. 0% 5 0. 0% 6 0. 0% 7 0. 0% 8 0. 0% 9 0. 0% 100.0% $0 $5 $10 $15 $20 $25 $30 MillionsWeighted Average Maturity: 328 days U.S. Treasury 11% Federal Agency 46% LGIP 43% Sector Distribution © PFM 2© PFM 2© PFM 2 Security Type and Issuer Compliance1,2,3 Security Type Book Value % of Portfolio Permitted by Policy Compliance U.S. Treasury $4,636,821 10.8%100.0% Federal Agency $19,728,609 45.9%100.0% AZ LGIP $18,574,866 43.3%100.0% Total Book Value $42,940,296 100.0% Maturity Book Value % of Portfolio Permitted by Policy Compliance 0-6 Months $23,591,708 54.94%No Limit  6-12 Months $2,061,315 4.80%No Limit  1-2 Years $8,142,927 18.96%No Limit  2-3 Years $9,144,346 21.30%No Limit  Over 3 Years $0 0.0%0% Total Book Value $42,940,296 100.0% Accrual Basis Earnings 10/1/20 through 12/31/20 Estimated Earnings $100,967.33 Total Estimated Earnings $100,967.33 1.Investment policy dated February 2020. 2.Maturity distribution does not include accrued interest. 3.Accrual basis earnings does not include LGIP balances. Issuer Book Value % of Portfolio Permitted by Policy Compliance FNMA $9,212,150 21.45%100% FHLB $4,797,250 11.17%100% FHLMC $5,719,209 13.32%100% U.S. Treasury $4,636,821 10.80%100% AZ LGIP $18,574,866 43.3%100% Total Book Value $42,940,296 100.0% Town of Marana as of 12/31/20 © PFM 3© PFM 3© PFM 3 Economic Update Current Market Themes U.S. economic conditions in Q4 were characterized by: •1) a resurgence in global coronavirus cases, causing the reintroduction of lockdown measures; •3) moderating labor market and consumer spending data; •2) expedited vaccine approval initiatives, but challenging logistics surrounding mass inoculation; and •4) a contentious U.S. presidential election . Congress passed a $900 billion economic relief package including: new household stimulus checks, expanded unemployment benefits, support for small businesses, resources for the vaccine effort; and additional aid to schools. After a strong V-shaped recovery earlier in the year, both consumer confidence and retail sales fell for the quarter. In Q4, surging COVID-19 cases caused the labor market recovery to slow, with the unemployment rate ending the year at 6.7%. Personal income was dragged down as government loan programs ended, and other social programs expired. Portfolio Strategy Portfolio Strategy in the Fourth Quarter: −Carefully considered the various headwinds caused by an uneven and decelerating recovery. −Yield spreads returned to near pre-pandemic levels in most sectors while new supply waned. As a result, Treasury allocations inched higher. −Strong demand for agency bonds pushed incremental yield spreads down to single digits. −Portfolios currently include larger allocations relative to prior years when spreads were consistently tight to similar-duration Treasuries. Town of Marana as of 12/31/20 © PFM 4© PFM 4© PFM 4 Source: Bloomberg, as of 12/31/2020. The U.S. Treasury yield curve steepened during the quarter. Short-term rates (on maturities less than five years) were essentially unchanged, anchored by the Fed’s zero interest rate policy, while yields on maturities beyond five years increased by 10 to 25 basis points (0.10% to 0.25%). The spread between the yield on 2-year and 10-year Treasuries reached a three- year high of 79 basis points (0.79%). As a result, short-and intermediate-term U.S. Treasury index returns were only slightly positive for the quarter, while longer-duration indices were notably negative. The 2-year Treasury decreased modestly by 1 basis points (0.01%) since September 30, 2020, to end the quarter at 0.12%. Treasury Yields Remain Near-Zero Rate Territory Town of Marana as of 12/31/20 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 1.80% Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 2-Year Treasury Yields 0.25% 1.57% 0.15% 0.12% 0.13% © PFM 5© PFM 5© PFM 5 Disclosures PFM is the marketing name for a group of affiliated companies providing a range of services. Investment advisory services areprovided by PFM Asset Management LLC which is registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Additional applicable regulatory information is available upon request. The views expressed within this material constitute the perspective and judgment of PFM Asset Management LLC at the time of distribution and are subject to change. Any forecast, projection, or prediction of the market, the economy, economic trends, andequity or fixed-income markets are based upon current opinion as of the date of issue, and are also subject to change. 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