Conditions on Public Agency Investing 6225 Lusk Blvd | San - - PowerPoint PPT Presentation
R AS S E T MANAGE ME NT CHANDLE The Impact of Current Conditions on Public Agency Investing 6225 Lusk Blvd | San Diego, CA 92121 | Phone 800.317.4747 | Fax 858.546.3741 | www.chandlerasset.com
6225 Lusk Blvd | San Diego, CA 92121 | Phone 800.317.4747 | Fax 858.546.3741 | www.chandlerasset.com CHANDLE R AS
S E T MANAGE ME NT
Source: U.S. Department of Labor
0% 2% 4% 6% 8% 10% 12% 14%
Recession United States California
2
Source: Standard and Poor’s
Area 1 Year 3 Year 5 Year National
Los Angeles
San Diego
0.32%
San Francisco
0.86%
% Change in Prices
50 100 150 200 250 300
Recession S&P/Case-Shiller National Home Price Index San Diego San Francisco Los Angeles
3
4
Source: US Department of Commerce Source: The Conference Board
100 200 300 400 500 600 2/10 4/10 6/10 8/10 10/10 12/10 2/11 4/11 6/11 8/11 10/11 12/11 2/12
(000's)
Starts - Single Family Housing
0.5 1 1.5 2 2/10 4/10 6/10 8/10 10/10 12/10 2/11 4/11 6/11 8/11 10/11 12/11 2/12
Percent (%)
Leading Economic Indicators
Single-family housing starts declined 9.9% in February to 457,000, compared to 507,000 in January. However, there was strength in multi-family starts which rose 21.1% in the month. The housing market remains under pressure, but seems to have stabilized following several years of sharp declines. Some housing data has recently surprised to the upside. The LEI increased 0.7% in February. In our view, the ongoing positive trend in the LEI is indicative of a slow economic growth environment.
Source: U.S. Department of Commerce
GDP Quarterly Percent Change
0.0 2.0 4.0 6.0 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 3/11 6/11 9/11 12/11
5
Source: Bloomberg
6 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 3 mo 2 yr 5 yr 30 yr
U.S. TREASURY YIELDS
MAR 11 FEB 12 MAR 12
10 yr
Source: IMF
7
2 4 6 8 10
G D P % C h a n g e Year
Estimates Advanced Economies Emerging and developing economies
8
Source: Bloomberg
0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
Italy Spain Germany 10 Year Gov't Yield
9
Source: Federal Reserve
Open Market Operations
Quantitative Easing I On March 18, 2009, the Fed announced purchases of $750 billion of agency mortgage- backed securities and $300 billion of Treasury securities. Quantitative Easing II The Fed announced on November 3, 2010, that it will purchase $600 billion in new treasury securities while simultaneously reinvesting maturing bonds of about $300 billion. Maturity Extension Program (Operation Twist) Sell $400 billion of Treasuries in the 3 month – 3 year range and purchase an equal amount in the 6 year – 30 year range
Interest Rate Policy
Interest Rate Policy In response to the crises the Fed has lowered the overnight bank lending rate
beginning of 2008 to 0.00%
Discount rate has been lowered from 4.75% to 0.75% Disclosing the time frame of interest rate policy (Hold rates low until December, 2014) .
10
Source: Federal Reserve
$0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 4/25/2007 10/25/2007 4/25/2008 10/25/2008 4/25/2009 10/25/2009 4/25/2010 10/25/2010 4/25/2011 10/25/2011 Assets In Millions $
Other Assets Emergency Programs Discount Window Borrowing GSE Debt Agency Mortgage Back Security Treasury Bonds
11
0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% TIPS Implied Inflation Rate
Recession 20 Year TIPS Implied inflation Rate
Source: Bloomberg
12
Source: CDIAC
Investment Type Maximum Maturity Maximum Specified % of Portfolio Minimum Quality Requirements LOCAL AGENCY BONDS 5 YEARS NONE NONE U.S. TREASURY OBLIGATIONS 5 YEARS NONE NONE STATE OBLIGATIONS—CA AND OTHERS 5 YEARS NONE NONE CA LOCAL AGENCY OBLIGATIONS 5 YEARS NONE NONE U.S. AGENCY OBLIGATIONS 5 YEARS NONE NONE BANKERS’ ACCEPTANCES 180 DAYS 40%
E
NONE COMMERCIAL PAPER—SELECT AGENCIES
F
270 DAYS 25% OF THE AGENCY’S MONEY G “A-1” IF THE ISSUER HAS ISSUED LONG-TERM DEBT IT MUST BE RATED “A” WITHOUT REGARD TO MODIFIERS H COMMERCIAL PAPER—OTHER AGENCIES
I
270 DAYS 40% OF THE AGENCY’S MONEY J “A-1” IF THE ISSUER HAS ISSUED LONG-TERM DEBT IT MUST BE RATED “A” WITHOUT REGARD TO MODIFIERS H NEGOTIABLE CERTIFICATES OF DEPOSIT 5 YEARS 30%
K
NONE CD PLACEMENT SERVICE 5 YEARS 30%
K
NONE REPURCHASE AGREEMENTS 1 YEAR NONE NONE REVERSE REPURCHASE AGREEMENTS AND SECURITIES LENDING AGREEMENTS 92 DAYS
L
20% OF THE BASE VALUE OF THE PORTFOLIO NONE M MEDIUM-TERM NOTES N 5 YEARS 30% “A” RATING MUTUAL FUNDS AND MONEY MARKET MUTUAL FUNDS N/A 20%
O
MULTIPLE P,Q COLLATERALIZED BANK DEPOSITS 5 YEARS NONE NONE MORTGAGE PASS-THROUGH SECURITIES 5 YEARS 20% “AA” RATING R BANK/TIME DEPOSITS 5 YEARS NONE NONE COUNTY POOLED INVESTMENT FUNDS N/A NONE NONE JOINT POWERS AUTHORITY POOL N/A NONE MULTIPLE S LOCAL AGENCY INVESTMENT FUND (LAIF) N/A NONE NONE
13
Source: Bloomberg
Government Corporate
Issuer 2007 2012 Issuer 2007 2012
United States Aaa/AAA Aaa/AA+ Johnson & Johnson Aaa/AAA Aaa/AAA FNMA Aaa/AAA Aaa/AA+ General Electric Company Aaa/AAA Aa3/AA+ FHLMC Aaa/AAA Aaa/AA+ Caterpillar Inc A2/A A2/A FHLB Aaa/AAA Aaa/AA+ JP Morgan Chase & Company Aa2/AA- Aa3/AA+ FFCB Aaa/AAA Aaa/AA+ General Electric Capital Corp Aaa/AAA A1/AA+ State of California A2/A+ A1/A- Goldman Sachs Aa3/AA- A1/A- International Wells Fargo Corp Aa1/AA+ A2/A+ Germany Aaa/AAA Aaa/AAA Citigroup Aa3/AA A3/A- France Aaa/AAA Aaa/AA+ Bank of America Aa1/AA Baa1/A- Spain Aaa/AAA A3/A Toyota Motor Credit Corp Aaa/AAA Aa3/AA- Italy Aa2/A+ A3/BBB+ Ford Motor Credit Corp B1/B Ba1/BB+
14
O/N 0.01% 0.01% 0.05% 0.03% 3 Month 0.08% 0.13% 0.17% 0.17% 6 Month 0.13% 0.18% 0.34% 0.22% 1 Year 0.17% 0.22% 0.49% 0.29% 2 Year 0.28% 0.33% 0.64% 0.50% 3 Year 0.42% 0.57% 0.89% 0.75% 4 Year 0.64% 0.83% 1.23% 0.92% 5 Year 0.87% 1.15% 1.58% 1.14%
Source: Bloomberg
15