That the City Council receive and file the Treasurer’s Investment Report for the quarter ending March 31, 2025.

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 March 31, 2025, these funds had a market value of $83,463,838, with $38,245,172 (45.82 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 2025 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 March 31, 2025:

After a hotter than anticipated January CPI print, recent data has again pointed to inflation slowing. However, uncertainty remains as to what extent tariffs will result in more inflation. Job creation improved marginally in February, yet the underemployment rate also notably increased which together may reflect a bias toward part-time job creation. The Federal Reserve appears poised to leave monetary policy unchanged in the near-term pending clarity on fiscal policy. As such, the Chandler team expects gradual normalization of monetary policy and a steepening yield curve through the remaining year.

After leaving the Fed Funds Rate unchanged at 4.25-4.50% at the January meeting, the Federal Open Market Committee (FOMC) did not have a scheduled meeting in February. Fed policy makers now find themselves in a precarious position as the polarizing initiatives the Trump administration posits continue to garner uncertainly and renewed fears of inflation. According to Chair Powell, the Fed is “well positioned to wait for greater clarity,” and likely to leave the Fed Funds Rate unchanged at the upcoming March FOMC meeting. The market implied probability for a March rate cut is at 0.8%. As the effects of trade and fiscal policy become clearer, our view at Chandler is for monetary policy easing to continue at a slower cadence through 2025.

US Treasury yields declined, and the curve flattened in February. The 2-year Treasury yield declined 21 basis points to 3.99%, the 5-year Treasury fell 31 basis points to 4.02%, and the 10-year Treasury yield dropped 33 basis points to 4.21%. The spread between the 2-year and 10-year Treasury yield points on the curve narrowed to +22 basis points at February month-end versus +34 basis points at January month-end. The spread between the 2-year Treasury and 10-year Treasury yield one year ago was -37 basis points. The spread between the 3-month and 10-year Treasury yield points on the curve was -9 basis points in February, versus +25 basis points in January.

Escalating concern over trade policy uncertainty, and recent economic data signaling potential slowing of the economy led investors to seek the safety of US Treasuries in February. Treasury yields finished the month lower with longer dated maturities declining more than shorter-dated maturities flattening the yield curve. February also marked the first time the 2-year yield fell below 4% since October 2024, reaching 3.99%. 

The City's general government portfolio investment goals are to maintain and preserve the safety of funds in custody and provide liquidity for anticipated expenditure needs.

The City also has investments in irrevocable Section 115 Trusts for the purpose of pre-funding retiree health care costs, also known as other post-employment benefits (OPEB), as well as retiree pension obligations. In March 2016, the City Council approved the establishment of Section 115 OPEB Trust with CalPERS California Employers’ Retiree Benefit Trust (CERBT).  Subsequently, in June 2018, the City Council approved the establishment of a Pension Rate Stabilization Trust Fund administered by the Public Agency Retirement Services (PARS). The goal of investing funds in the Section 115 Trusts is to provide a reasonable level of return and growth that can create additional resources to help partially offset future OPEB and pension obligation payments.

Benefits of Section 115 Trust include:

The following table summarizes the performance of the City’s CalPERS Retiree Medical Trust (OPEB) as of March 31, 2025:

The following table summarizes the performance of the City’s PARS Post-Employment Benefits Trust (pension obligations) as of March 31, 2025:

There is no fiscal impact related to receiving and filing this report.