AgdaPkt 2020-09-14 Amended Joint SA PFA

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6.A. - Page 2 of 46 ANALYSIS The attached investment report indicates that as of June 30, 2020, funds (excluding cash with fiscal agents) from all sources were producing an annual earnings rate of 1.91%. The market value of the portfolio as of June 30 was $301,325,317. This includes the funds held in the San Mateo County Treasurer's investment pool and with the State Treasurer's investment pool. All of these investments comply with the City's investment policy. The City has sufficient liquid resources available to meet expenditure requirements for the next six months. The portion of the City's portfolio that is managed by PFM has a total market value of $171,031,020. As of June 30, the portfolio was earning an annual yield at cost of 2.07%, and the yield at market was 0.46%. The average maturity of the portfolio was 2.89 years. The market benchmark, selected with consultation from the City Council Finance/Audit Subcommittee, is the Bank of America Merrill Lynch (BofA ML) 1-5 year U.S. Treasury Index. Below is a table summarizing the City's portfolio performance compared to the benchmark, for the period ending June 30, 2020. A cloud of uncertainty hangs over the U.S. and global economies entering the second half of 2020. While economic data has rebounded significantly from April's lows, it remains well below pre -pandemic levels. To recapture previous economic highs, it will be important to contain COVID-19 hotspots and restore public confidence. The Federal Reserve's (Fed) zero interest rate policy and market intervention has stabilized the bond market and returned liquidity in the financial markets. The economy suffered significate negative impact due to the lockdown in the first and second quarter of 2020, but early signs of rebound have appeared as some states start to reopen. Economic conditions are depressed, but appear to have bottomed. Yields remain very low and are not expected to move meaningfully over the near term. PFM's strategy of reassessing every issuer on their approved list for both short- and intermediate —term impact of the economy resulted with many issuers gradually reapproved. The portfolio duration (a way to measure the sensitivity of a security's price if the market were to change) was maintained in line with the benchmark — a strategy consistent with the high levels of market uncertainty and the expectation that rates will remain low for a prolonged period. Prior to the pandemic, the portfolio was structured with a higher -than -normal allocation to U.S. Treasuries; as market conditions have stabilized PFM has been cautiously reallocating this excess liquidity into other sectors, such as federal agencies. Page 2 of 4 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore TotalTotal Return Effective Yield Portfolio/Bench mar turn Quarter Since Inception uration at ded 6/30/20 (12/31/16) MarketBofA ML 1-5 year U.S.Treasury Index A cloud of uncertainty hangs over the U.S. and global economies entering the second half of 2020. While economic data has rebounded significantly from April's lows, it remains well below pre -pandemic levels. To recapture previous economic highs, it will be important to contain COVID-19 hotspots and restore public confidence. The Federal Reserve's (Fed) zero interest rate policy and market intervention has stabilized the bond market and returned liquidity in the financial markets. The economy suffered significate negative impact due to the lockdown in the first and second quarter of 2020, but early signs of rebound have appeared as some states start to reopen. Economic conditions are depressed, but appear to have bottomed. Yields remain very low and are not expected to move meaningfully over the near term. PFM's strategy of reassessing every issuer on their approved list for both short- and intermediate —term impact of the economy resulted with many issuers gradually reapproved. The portfolio duration (a way to measure the sensitivity of a security's price if the market were to change) was maintained in line with the benchmark — a strategy consistent with the high levels of market uncertainty and the expectation that rates will remain low for a prolonged period. Prior to the pandemic, the portfolio was structured with a higher -than -normal allocation to U.S. Treasuries; as market conditions have stabilized PFM has been cautiously reallocating this excess liquidity into other sectors, such as federal agencies. Page 2 of 4 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore