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HomeMy WebLinkAboutCouncil Presentation 8-17-2021 Marana_2Q21_Council Report© PFM 0© PFM 0© PFM 0 Town of Marana Investment Portfolio Summary Quarter Ending June 30, 2021 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+ 62% AAAm 35%AA 1% AA- 2% Credit Quality (S&P Ratings) Executive Summary1,2 Account Summary Ending Values as of 6/30/21Beginning Values as of 3/31/21 Market Value $45,200,629 $48,235,399 Book Value $45,065,231 $48,039,242 Unrealized Gain/(Loss)$135,398$196,157 W eighted Average YTM at Market 0.20%0.18% W eighted Average YTM at Cost 0.63%0.73% Maturity Distribution Town of Marana as of 6/30/21 1.Market Value and Book Value include $15,606,421 invested with the State Local Government Investment Pools 5 & 7 as of 6/30/2021. 2.Weighted average maturity includes LGIP balances and uses book values for weighting. Accrued interest and cash balances are excluded. 37.0% 12.7%15.4% 26.5% 4.5%0.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% $0 $5 $10 $15 $20 $25 $30 Millions3.8% Weighted Average Maturity: 461 days U.S. Treasury 26% Federal Agency 35% Corporate 5% LGIP 34% 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 $11,735,362 26.0%100.0% Federal Agency $15,652,895 34.7%100.0% Corporates $2,070,553 4.6%40.0% AZ LGIP $15,606,421 34.6%100.0% Total Book Value $45,065,231 100.0% Maturity Book Value % of Portfolio Permitted by Policy Compliance 0-6 Months $16,663,992 37.0%No Limit  6-12 Months $5,703,226 12.7%No Limit  1-2 Years $6,928,712 15.4%No Limit  2-3 Years $11,921,980 26.5%No Limit  3-4 Years $1,838,230 4.1%No Limit  4-5 Years $2,009,091 4.5%No Limit  Over 5 Years $0 0.0%0% Total Book Value $45,065,231 100.0% Accrual Basis Earnings 4/1/21 through 6/30/21 Estimated Earnings $81,086 Total Estimated Earnings $81,086 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 $4,160,913 9.2%100% FHLB $4,780,194 10.6%100% FHLMC $6,711,789 14.9%100% U.S. Treasury $11,735,362 26.0%100% Apple Inc $521,972 1.2%5% Blackrock Inc $515,014 1.1%5% Visa $516,527 1.1%5% Wal-Mart Stores Inc $517,040 1.1%5% AZ LGIP $15,606,421 34.6%100% Total Book Value $45,065,231 100.0% Town of Marana as of 6/30/21 © PFM© PFM© PFM 3 Economic Update Current Market Themes −Coronavirus −COVID-19 caseload was dramatically lower as vaccine inoculations ramped up, balanced with waning vaccine demand and the emergence of more infectious variants. −Economy −Consumer-oriented economic data was strong through the second quarter, supported by ongoing fiscal stimulus measures. −Markets −Inflation figures were elevated, fueled by surging economic activity amid labor and supply chain shortages. −The U.S. Treasury yield curve flattened modestly over the quarter, as longer term yields retraced some of their significant moves higher in the first quarter, and shorter term yields inched higher from rock- bottom lows. −The Federal Reserve reaffirmed its commitment to keep short-term rates near-zero and the asset purchase program in place until the economy is fully recovered. −The strong U.S. economic expansion is expected to persist, aided by a vaccine-driven reopening, pent-up consumer demand, and continued fiscal and monetary support. Portfolio Strategy −We largely maintained a neutral duration stance relative to benchmarks as yields remained mostly range bound. −During the quarter, we maintained core allocations in most sectors while opportunistically trimming non-Treasury allocations in certain sectors and maturities when spreads reached multi-year lows, match benchmark duration extensions, and carefully manage risk as we consider inflationary pressures and Fed policy uncertainty. −During the quarter PFM engaged in opportunistic selling, by reducing corporate bonds that reached very rich levels—largely under two years remaining until maturity—and extended the duration of credit holdings by reinvesting in longer corporate issues, which captured value along the steeper portions of the curve. −2021 GDP expectations have been revised upward, with current forecasts pointing to an annualized 6% growth this year. Despite these projections, growing inflationary pressures may force the Federal Reserve’s hand when considering tapering its bond purchases and, ultimately, future rate increases. −Given balance risks, w e plan to maintain portfolio durations in line with respective benchmarks as w e continue to monitor the economic recovery. Town of Marana as of 6/30/21 © PFM 4© PFM 4© PFM 4Source: Bloomberg, as 6/30/2021. Yields on the short end of the curve rose slightly in the Second Quarter of 2021 but remain anchored by the Fed’s near-zero rate policy, still yet to recover to pre-2020 rates, leading to muted returns for Treasury indexes. The 2-year Treasury increased modestly by 9 basis points (0.09%) since March 31, 2021, to end the quarter at 0.25%. Treasury Yields Remain Low Town of Marana as of 6/30/21 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8%Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Oct-20Nov-20Dec-20Jan-21Feb-21Mar-21Apr-21May-21Jun-212-Year Treasury Yields 0.12% 1.45% 0.25% 0.15%0.13%0.16% 0.25% © PFM© PFM© 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. 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