That the City Council receive and file the Treasurer’s Investment Report for the quarter ending September 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 September 30, 2025, these funds had a market value of $82,736,760, with $36,931,567 (44.64 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 September 30, 2025:

Economic data was mixed in August as market participants braced for a probable rate cut in September. Treasury yields were lower across the curve as the labor market and housing market showed signs of slowing. However, the consumer remained resilient as Retail Sales increased, while Consumer Confidence showed neither signs of exuberance nor caution.  Core inflation levels remain above the Fed’s target, and tariff impacts remain uncertain. Given the economic outlook, our view at Chandler is for a steeper yield curve driven mainly by gradual normalization of monetary policy starting with a 25 basis point rate cut in September.

After holding its benchmark federal funds rate steady at 4.25% to 4.50% at the July Federal Open Markets Committee meeting in July, the Federal Reserve did not convene in August. Nevertheless, Chair Jerome Powell indicated an interest-rate cut could be on the table for September, telling attendees at the Jackson Hole Economic Symposium, “The stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance”.

US Treasury yield curve steepened in August, as the 2-year Treasury yield declined 34 basis points to 3.62%, the 5-year Treasury was 28 basis points lower to 3.70%, and the 10-year Treasury yield was down 15 basis points to 4.23%. The spread between the 2-year and 10-year Treasury Note yield increased to +61 basis points at August month-end versus +42 basis points at July month-end. The spread between the 2-year Treasury and 10-year Treasury yield one year ago was -1.5 basis points. The spread between the 3-month Bill and 10-year Treasury Note yield was -7 basis points in August versus +4 basis points in July..

Expectations of Federal Reserve rate cuts pushed short-term yields lower in August. Investors anticipated the Fed would begin easing monetary policy soon, as economic growth moderated and recent data pointed to a slowing labor market. Although yields fell across the curve, long-term inflation expectations remained heightened amid trade policy uncertainty which slowed the decline in yields on the long end of the yield curve, thus the yield curve steepened. The 2-year Treasury Note, which tends to lead the Fed Funds Rate, dropped 34 basis points from the end of July to the end of August.

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) for retiree health costs. 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), for retiree pension obligations. 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 September 30, 2025:

The following table summarizes the performance of the City’s PARS Post-Employment Benefits Trust (pension obligations) as of September 30, 2025:

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