TRANSMITTAL LETTER FOR BOARD MEETING OF AUGUST 29, 2013
COMMITTEE ON FINANCE
Mr. David St. Pierre, Executive Director
Title
Report on the investment interest income during May 2013
Body
Dear Sir:
Attached is a report of cash investment interest income received by the District for the month of May 2013 and a comparison of income for the same period in 2012.
The District's inventory of investments at May 31, 2013, consisted of 220 items having a total par value of $877,008,578.71, an average annual yield of 1.211%, and total interest income to maturity of approximately $35 million. Inventory figures at the same date in 2012 were 221 items having a total par value of $ 1,021,238,205.77, an average annual yield of 1.186%, and total interest income to maturity of approximately $32.7 million.
Interest Forecast for 2013:
Expect short-term rates (0-5 years) to remain anchored by an artificially low Federal Funds rate for an extended period of time. On December 12, 2012 the Fed announced two monetary policy modifications which support low market rates in the near term, and replace the former policy guidance of exceptionally low interest rates at least through mid-2015. The Fed adopted two thresholds for determining policy change; rates will be held near zero as long as unemployment remains above 6.5% and projected inflation remains below 2.5%. The new guidance still supports mid-2015 for the first interest rate hike according to pricing in the Fed Fund futures market. The District will experience its fifth consecutive year of very low interest income earned on short-term investments.
The District has invested its longer-term holdings in callable government agency securities and municipal bonds, which will provide a significant portion of the interest income earned in 2013. These investments pay interest twice per year; therefore, the months of January and July will provide a majority of the interest income for the year. Income earned in other months will be minimal and would relate to short-term investments maturing throughout the year to meet the operating and capital needs of the District.
Respectfully Submitted, Mary Ann Boyle, Treasurer, MAB:st
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