Office of the Treasurer & Tax Collector City and County of San Francisco José Cisneros, Treasurer Tajel Shah, Chief Assistant Treasurer Robert L. Shaw, CFA, Chief Investment Officer Treasury Oversight Committee November 8, 2019 City Hall - Room 140 ● 1 Dr. Carlton B. Goodlett Place ● San Francisco, CA 94102-4638 Telephone: 415-554-5210 ● Facsimile: 415-554-5660
Table of Contents Economic & Market Overview 3-5 Strategy 6-8 The Economic Outlook 9-13 Pooled Fund Review 14-17 Pool Participants Breakdown 18-19 Appendix A 20-24 October Monthly Report 2019 Separate handout 2
Key Economic Data Producer Price Index vs Consumer Price Index Gross Domestic Product 4% 62 3.5% 59 3% 2.5% 56 53 2% 1.5% 50 1% 0.5% 47 44 0% -0.5% GDP Year-over-Year Change ISM Manufacturing PMI 41 Core CPI Core PPI CPI PPI ISM Non-Manufacturing PMI -1.5% -1% 38 9/15 9/16 9/17 9/18 9/19 9/15 9/16 9/17 9/18 9/19 Employment JOLTS & Jobless Claims 12% 600K 9,000K Wage Growth 66% 8,000K Wage Growth & Unemployment Rate Labor Participation Rate 10% 500K 7,000K Unemployment Rate Labor Participation Rate 65% 8% 400K 6,000K 5,000K 6% 300K 64% 4,000K 4% 200K 3,000K 63% 2,000K 2% 100K US Initial Jobless Claims US Job Openings 1,000K 62% 0% 0K 0K 9/09 9/11 9/13 9/15 9/17 9/19 8/09 8/11 8/13 8/15 8/17 8/19 3 Source: Bloomberg
Key Economic Data Housing 7 800K Existing Homes Sales New Home Sales Millions 700K 6 600K 5 500K 4 400K 3 300K 2 200K 1 100K 0 0K 9/09 9/10 9/11 9/12 9/13 9/14 9/15 9/16 9/17 9/18 9/19 S&P/Case-Shiller Home Price Indices 300 20 Metro Composite San Francisco Area 250 200 150 100 8/09 8/10 8/11 8/12 8/13 8/14 8/15 8/16 8/17 8/18 8/19 4 Source: Bloomberg
Yield Curve Changes 2.2% UST Yields 11/1/19 Change 8/23/19 3M 1.95 1.51 -0.45 2.1% 6M 1.86 1.54 -0.32 2.0% 1Y 1.72 1.53 -0.19 2Y 1.53 1.60 0.06 1.9% 3Y 1.45 1.60 0.14 5Y 1.42 1.60 0.18 1.8% 1.7% 1.6% 1.5% 1.4% 1.3% 1.2% 3M 1Y 2Y 3Y 5Y UST Yield Curve as of 6/28/2019 UST Yield Curve as of 8/23/2019 UST Yield Curve as of 11/4/2019 5 Source: Bloomberg
Strategic Considerations Policy Issues: • Monetary –Rate Cuts remain policy: • 10/30/2019: Cut by 0.25% - 3rd Cut since December 2008; and • 2019 Rate Decrease Probability: • 4 th Rate Cut Probability is 16% (December 2019); • Fiscal: • Tax Reform – No Change: • Corporate. Buybacks remain focus; • Repatriation of Earnings, but not investing in factories / jobs in US; and • Individual. One-time Bonus, not Pay Raises. • Tariffs: Little shifting of production to United States; and • Trade: The New NAFTA, China and Europe. 6
Strategic Considerations Government Policy Issues: • Federal Reserve’s Balance Sheet - $4.5 Trillion (Fall 2017): • $4.0 Trillion (October 2019); • Up from $3.8 Billion in July; • Not being called Quantitative Easing 7
Strategic Considerations Portfolio Issues: • Inflows: August: Airport ($957 Million); and • October: CCSF ($97 Million) • • Use Money Market Sector to Satisfy Liquidity Needs • Portfolio Duration: 0.64 (Sept 2019): 0.99 December 2018; • 0.95 in December 2017; and • 0.68 in December 2016. • • Duration is an Outcome, not an Objective. Approach is: Purchasing Securities that mature on (or slightly before) a known need – • such as Payroll, Debt Service, Capital Projects, etc.; and Opportunistic Investing. • 8
The Economic Outlook Goldilocks Zone – Still There Factor Current Situation Low unemployment rate 3.5% (50 Year Low) Increasing asset prices (stocks, real estate, etc.); S&P 500 (+15.8% - since 2009 Trough) Low Interest rates; Below historical norms & falling Brisk but steady GDP growth; and > 2.5% past several years Low inflation Low (1.7%) & below target Counterpunching: • Labor participation rate is range bound – despite the large number of job opening; • Asset prices (such as US Equities) have been very volatile over the past year; • Interest Rates: Shifted quickly from Increases to Decreases; • GDP: The best positive among the factors – but declining; and • Average Hourly Earnings remains above 3.0%. 9
Future Rate Changes Moving into the inflection zone: • Fed Funds: 1.20% - 1.75% Range; • +1.75% (9 Rate Increases & 3 Decrease since December 2015); • Fed Minutes: Disagreement amount members on Direction; • Forecast is a <20% chance of 1 More rate Decrease in 2019; and • Forecast (Fed Dot Plot): • September 2018: Target Range was 3.25% - 3.50%; • December 2018: Target Range now 3.00% - 3.25%; • March 2019: Target Range was 2.50% - 2.75%; • Sept. 2019: Target Range now 2.50% - 2.75%; Pool Impact: • Yield Curve is Flat / Inverted between 2 years (1.59%) and 5 years (1.60%) • Makes longer dated bonds less attractive. 10
Yield Curve Inversions & Recessions ? Date of Start of Number of inversion recession months 9/17/1978 1/2/1980 15.5 9/12/1980 7/1/1981 10 8/11/1989 7/1/1990 11 2/2/2000 3/1/2001 13 2/1/2006 12/1/2007 22 8/31/2019 ? ? 11
The Dot Plot – September 2019 12
The Dot Plot – December 2018 13
Historical Maturity Distribution Comparison Maturity Distribution 50% 40% 30% 9/30/2018 20% 9/30/2019 10% 0% 0 TO 1 MONTHS 1 TO 3 MONTHS 3 TO 6 MONTHS 6 TO 12 MONTHS 12 TO 24 MONTHS 24 TO 36 MONTHS 36 TO 48 MONTHS 48 TO 60 MONTHS Effective Maturity Distribution 50% 40% 30% 9/30/2018 20% 9/30/2019 10% 0% 0 TO 1 MONTHS 1 TO 3 MONTHS 3 TO 6 MONTHS 6 TO 12 MONTHS 12 TO 24 MONTHS 24 TO 36 MONTHS 36 TO 48 MONTHS 48 TO 60 MONTHS 14 Source: SunGard APS2
Portfolio Comparison 12,000 $ Millions 11,250 5.0% 10,500 6.3% 0.3% 9,750 6.6% Supranationals 7.3% 9,000 Money Market Funds 4.4% 1.0% Medium Term Notes 8,250 7.0% 23.2% 4.1% Commercial Paper 7,500 4.5% 0.7% 0.8% Banker's Acceptances 9.2% 19.6% 10.2% 6,750 Negotiable CDs 1.6% 0.8% 5.3% 6,000 Public Time Deposits 1.9% 17.2% 10.6% State/Local Agencies 5,250 3.7% 3.6% TLGP 4,500 Federal Agencies 3,750 48.7% U.S. Treasuries 49.0% 51.5% 3,000 53.7% 2,250 1,500 750 17.4% 9.7% 8.7% 5.8% - 9/30/2016 9/30/2017 9/30/2018 9/30/2019 15 Source: SunGard APS2
Portfolio Comparison STEP CPN STEP CPN 3% FLOAT 1% 5% FLOAT 20% FIXED 77% FIXED 94% September 30, 2018 September 30, 2019 16 Source: SunGard APS2
County Pooled Fund Statistics Name of Fund Portfolio Size* ($ mns) 2.6% Los Angeles County $27,584.0 2.4% SF LAIF 24,268.6 Monthly Change In Earned Income Yield Sac SD City and County of San Francisco 10,639.3 2.2% Fresno County San Diego County 8,637.8 Contra Riverside County 6,525.7 Costa LAIF 2.0% Riverside San Bernardino County 6,240.0 Los Angeles County SB Sonoma Orange County (ex. Schools) 3,754.3 1.8% Fresno 3,572.0 Orange County Sacramento County 3,458.7 1.6% Contra Costa County 2,484.6 Aug 31, 2018 Aug 30, 2019 Nov 4, 2019 Sonoma County 2,208.9 1.4% * as of August 2019 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900 Weighted Average Maturity (in days) LGIP Index 30-Day Gross Yield September 2013 – September 2019 2.5% 2.0% 1.5% 1.0% San Francisco Earned Income Yield 0.5% LGIP Index 30-Day Gross Yield 0.0% Sep 13 Sep 14 Sep 15 Sep 16 Sep 17 Sep 18 Sep 19 17 Sources: Bloomberg, Sacramento County as of 10/21/2019
Pool Participants Breakdown As of September 2019 Pool Participant Fund Balance Percent of Fund General Fund/Special City Funds/Internal Services Funds $4,022,743,111 35.92% San Francisco International Airport 2,563,276,898 22.89% San Francisco Public Utilities Commission 1,389,004,684 12.40% San Francisco Municipal Transportation Authority 794,531,244 7.09% Facilities and Capital Projects Funds - General 568,921,176 5.08% San Francisco Unified School District 528,669,920 4.72% San Francisco General Hospital and Laguna Honda Hospital 330,882,940 2.95% Other agencies (incl. Transbay Joint Powers, Trial Courts) 305,918,959 2.73% OCII - Successor Agency – former SFRDA 273,333,290 2.44% Port of San Francisco 204,591,739 1.83% San Francisco Community College District 87,132,350 0.78% San Francisco County Transportation Authority 82,575,922 0.74% Pension and Retiree Health Care Trust Fund 48,296,245 0.43% Totals $11,199,878,480 100.0% 18 Sources: FSP Impromptu
Pool Participants Trends September 30, 2006 – September 30, 2019 12 Billions 10 8 6 4 2 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 General Fund/Special City Funds/Internal Services Funds San Francisco International Airport San Francisco Public Utilities Commission Other San Francisco Municipal Transportation Authority Facilities and Capital Projects Funds - General San Francisco General Hospital and Laguna Honda Hospital San Francisco Unified School District 19 Source: 2006 – 2019 Ending Balance Cognos and FSP Impromptu
Recommend
More recommend
