That the City Council receive and file the Treasurer’s Investment Report for the quarter ending June 30, 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 June 30, 2025, these funds had a market value of $92,011,896, with $47,536,061 (51.66 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 June 30, 2025:

As the midyear point of 2025 quickly approaches, economic data for the first half has indicated an easing of inflationary pressure. Nevertheless, core prices remain above target levels, and tariff related disruptions may surface in the second half of the year. In May, job creation was robust, however initial and continuing jobless claims trended slightly higher. Thus, the labor market continues to reflect an improved balance between supply and demand for workers. Given the current economic outlook, the Chandler team expects gradual normalization of monetary policy and a steepening yield curve.

The Federal Open Market Committee (FOMC) left the Federal Funds Rate unchanged, as projected, at 4.25 - 4.50% at the May meeting. Progress on inflation, paired with a softening labor market, and uncertainty surrounding fiscal policy leaves Fed policy makers reluctant to express firm conviction for the direction of near-term monetary policy. Fed Chair Powell continues to emphasize the Committee’s “wait and see” data-dependent approach.

US Treasury yields increased in May. The 2-year Treasury yield increased 30 basis points to 3.90%, the 5-year Treasury increased 24 basis points to 3.96%, and the 10-year Treasury yield also increased 24 basis points to 4.40%. The spread between the 2-year and 10-year Treasury yield points on the curve narrowed to +50 basis points at May month-end versus +56 basis points at April 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 -6 basis points in May, versus -13 basis points in April.

Market participants shrugged off some of the initial concern over negative effects of tariff policy as the flight-to-quality into US Treasuries reversed course driving yields up practically in unison approximately 20 basis points across the curve. Higher short-term yields suggest a broad view that the pace of rate cuts may be drawn out longer than perceived at the beginning of the year. The recent spike in medium and long-term yields is consistent with the perception that the proposed course of fiscal policy may not address the lingering budget deficit and may stoke inflation. The Chandler team projects a more cautious trajectory for rate adjustments, as the Federal Reserve weighs potential inflation pressures against signs of slowing growth.

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 CalPERS 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.  Some of the benefits of Section 115 Trust are:

The following table summarizes the performance of the City’s CalPERS Retiree Medical Trust (OPEB) as of June 30, 2025:

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