CCP 03-13-2000 - Laserfiche WebLink

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. . . The report shall explain the total investment return and compare the return and compare the rcturn with budgetary expectations. The total return for 1999 was $742,563 on an average portfolio balance (including cash equivalents) of $13,256,498, which equates to an average yield of 5.58% for the year. This compares favorably to 1999 interest income expectations in the range of 4.5% to 5.0%. The 1999 yield also compares closely to the benchmark 1999 average rate for a two year U.S. Treasury note of 5.43%. 1999 interest income of$742,563 resulted in a $288,363 positive deviation (63.5%) against budget. The primary reasons for this performance were slightly higher than expected yields and a larger than expected portfolio balance arising from construction start delays for the City Hall facility construction project and public improvements in the Gateway area (West Round Lake Road, Phase II) not proceeding in 1999. The rcport shall contain a discussion ofthe outlook for interest rates and the economic trend for the upcoming year investment strategies to he implemented, and budgetary expectations for investment incomc. The general outlook for interest rates in 2000 is for them to be higher than average 1999 levels. Many economists believe the United States economy will be negatively impacted by inflationary concerns caused by a tight labor market, higher energy costs, and Federal Reserve actions. There is also some market discontinuity (i.e., an inverted yield curve) resulting from the question if the thirty-year Treasury Long Bond will remain the pricing benchmark. By year-end 2000, we may be seeing the yield curve for all maturities less than the December 1999 higher yield trend. The estimated annualized rate of return for 2000 should be in the range of 5.0% to 5.5%. 2000 interest was budgeted at $548,300 on an expected average portfolio balance of $10,950,000 with an expected yield of5.00%. Attached Schedules Attached are related schedules for your further review: I. Investment Portfolio Analysis, December 31, 1999 2. Annualized Investment Portfolio Return, 1999 3. Investment Ladder, Note and Zero Maturities by Year, 2000-2004. This report will be discussed with the Operations and Finance Committee at their March, 2000 meeting. I herewith submit this ailllual report to the City Council pursuant to the annual reporting requirement of the Investment Policy. ~ Ii :Jb T eITance R. Post City Treasurer (Enclosures)