That the City Council receive and file the Treasurer’s Investment Report for the quarter ending December 31, 2024.

The Finance Department invests City funds in compliance with the California Government Code, Section 53600 et seq., and the City’s Investment Policy.  As of December 31, 2024, these funds had a market value of $78,674,031, with $32,813,387 (41.71 percent of the portfolio) maturing within 180 days, ensuring that sufficient funds are available to meet the City's budgeted expenditure requirements for the next six months.

Compliance: All investment transactions have been executed in conformance with the City's 2024 Investment Policy and the California Government Code. The term of maturity for all investments is limited to a maximum of five years unless the City Council gives prior approval to exceed this limitation. The average weighted maturity of the City’s portfolio did not exceed three years.

Investment Performance: The City’s portfolio is generally invested in four types of fixed-income investments: U.S. Agency obligations, U.S. Treasury obligations, highly rated corporate bonds, and the State of California Local Agency Investment Fund (LAIF). In general, Treasury, Agency, and corporate securities held by the City have maturities ranging from one month to five years, as authorized by the City’s Investment Policy and the State of California Government Code. City funds invested in LAIF are considered to be available overnight and, therefore, are assigned a one-day maturity.

The following table summarizes the performance of the City’s general government investment portfolio as of December 31, 2024:

The results from the US elections provided some clarity to the direction of fiscal policy and removed some of the political uncertainty that had been affecting capital markets. It is our view that the Federal Reserve will continue the course of easing monetary policy as the labor market normalizes and growth trends slower. In November, consumer spending once again drove solid economic growth. While the consumer has been resilient, declining savings rates, growing credit card debt, higher delinquencies, and a moderating labor market pose potential headwinds to future economic growth. Inflationary trends are subsiding, but core levels remain above the Fed’s target. The labor market is showing signs of cooling, reflecting an improved balance between supply and demand for workers. Given the cumulative effects of restrictive monetary policy and tighter financial conditions, we believe the economy will gradually soften and the Fed will continue to lower rates in the near-term, then pursue a moderate, data dependent pace through 2025.

As broadly anticipated, the Federal Open Market Committee (FOMC) reduced the Fed Funds Rate by 25 basis points to the range of 4.50 – 4.75% at the November meeting.  Chair Jerome Powell indicated that the Federal Reserve is taking a more neutral stance toward the dual mandate of maximum employment and price stability. Economic activity is expanding at a solid pace, while the Fed has gained confidence that the economy is on the path to the 2% inflation target. The Fed believes that monetary policy is still restrictive following the second rate cut, and the committee will exercise optionality as needed based on economic data. Chair Powell stated that in the near-term, the election results will have no effect on monetary policy as he avoided commenting on fiscal policy. Moving into year-end, the Chandler team still expects the Federal Reserve to adjust their policy stance to become less restrictive.

The US Treasury yield curve shifted lower in November. The 2-year Treasury yield edged down 2 basis points to 4.15%, the 5-year Treasury dropped 11 basis points to 4.05%, and the 10-year Treasury yield fell 12 basis points to 4.17%. The spread between the 2-year and 10-year Treasury yield points on the curve narrowed to +2 basis points at November month-end versus +11 basis points at October month-end. The spread between the 2-year Treasury and 10-year Treasury yield one year ago was -36 basis points. The inversion between 3-month and 10-year Treasuries widened to -32 basis points in November from -26 basis points in October.

The 25 basis point Fed Funds Rate reduction in November catalyzed lower treasury yields across the yield curve. The one-year point of the curve was the only exception, as 1-year yields were slightly higher to end the month. Economic data in November did not present any surprises to alter the course of the Federal Reserve’s path of easing monetary policy through year-end, and the market-implied odds of a rate cut at the December FOMC meeting stood at 66% at month end. The bond market rallied during the second half of November following President-elect Trump’s appointed Scott Bessent as Treasury Secretary. Yet, lower yields across the curve could also be partially attributed to less market liquidity due to holiday market closures.