CCP 01-27-1997 - Laserfiche WebLink

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1-' 1 Maturitv Philosophy Ie The concept of "laddering" maturities is a commonly used techniqLle that. in this case, supports a performance objective that overall return will tend to more nearly approximate I two year Treasury Note short term interest rates, as investments are made at then current five year intermediate term rates with varying maturities. This also allows for a consistent stream of maturities and the opportunity for investing in smaller, more frequently available - amounts than if large amounts were invested in "lumps". This is a source of liquid funds that can either be reinvested or used currently if appropriate. 'I The reoort shall eXIJlaio the total iovestment return and compare the return and compare the return with budgetarv expectations. I The total return for 1996 was $471,557 on an average portfolio balance (including cash equivalents) 01'$7,966,503 which equates to an average yield 01'5.92% for the year. This I cOt1}pares favorably to 1996 interest income expectations in the range of 5.0% to 5.5%. The 1996 yield also compares favorably to the benchmark 1996 average rate for a two year US Treasury note of 5.76%. I 1996 interest income of $471 ,557 resulted in a $136,307 positive deviation (40.1 %) against budget. The primary reasons for this performance were higher than expected yields Ie and a larger than expected portfolio balance. I The report shall contain a discussion ofthe outlook for interest rates and the economic trend for thc upcoming vear investment strategies to be implemented and bud~etarv expectations for investment income. I Th~ general outlook for interest rales in 1997 is for them to increase. Most economists believe the economy was gaining momentum as 1997 began and gro\\1h may be strong I enoLlgh to generate inflationary concerns and raise long-term interest rates. However, with both unemployment and inflation remaining low, it is problematic if the Federal Reserve will begin a course of additional rate increases in 1997. By year-end 1997, we may be I seeing the vield curve increase slightly across all maturities. The estimated annualized rate '- ~ '- ~ of return for 1997 should be in the range of 5.5% to 6.0%. I 1997 interest was budgeted at $492,750 on an expected average portfolio balance of $3,960,000 with an expected yield 01'5.5%. I I , Ie ~ I