Quarterly Letter to Members
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| In This Issue
Quarterly Letter Portfolio Matters
Comparisons
Fund Composition
5 Year Market
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| AMLIP Board Members |
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Margaret “Peggy” Macdonald
Treasury Budget Mgr
Fairbanks North Star Borough
Term 11/23
Julie Liew
Finance Director
City of Sitka
Term 11/23
Terry Eubank,
Finance Director
City of Kenai
Term 11/22
Layton Lockett
City Manager
City of Adak
Term 11/22
Cheyenne Heindel
Finance Director
Mat-Su Borough
Term 11/21
Kris Erchinger,
Finance Director
City of Whittier
Term 11/23
Jody Tow
Finance Director
Petersburg Borough
Term 11/21
Nils Andreassen
Executive Director AML
AMLIP Sponsor
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The Federal Open Market Committee (“FOMC” or “The Fed”) left the federal funds target rate unchanged 0 to 0.25%. However, despite the steadiness of the federal funds rate at 0.06%, Fed officials boosted the rate on its overnight reverse repurchase agreement facility (RRP) by 5 basis points to 0.05% and decided to lift the interest paid on excess reserves (IOER) by 5 basis points to 0.05%. This is the second time since January 2020 that the Fed has shifted the gap between IOER and the bottom of the central bank’s range. The last time officials tinkered with these administered rates relative to their overall target range was before the pandemic crisis. At that time the Fed opted to increase both the IOER and RRP rates by 5 basis points each after fed funds dropped to just 4 basis points above the lower bound of 1.5%. The June 16th adjustment should help bolster the central bank’s 0% floor, while keeping the target range for the fed funds rate unchanged.
Chairman Powell and the committee members continue to send a message to markets of patience with an emphasis on outcome-based rather than outlook-based monetary policy. Policy makers did not make any changes to the asset purchase program, although it was mentioned during the press conference that the path of asset purchases was discussed, but that they are very comfortable with the current program. However, in his press conference, Powell said this is the meeting where the Fed is “talking about talking about tapering” and the phrase can be retired going forward. He reiterated that the committee feels that there is “some time” before substantial further progress in the economy has been made to justify a change in asset purchases. Asset purchases remain on pace (treasuries $80 billion/month, mortgages $40 billion/month). Powell further added that the timing of a tapering announcement depends on the data and not on the calendar and that “our signaling of a change in asset purchases would be orderly, methodical and transparent, and we would provide advance notice if we decide to taper.” The Fed is on track to announce tapering at an upcoming meeting and we continue to believe that meeting will be the Jackson Hole Symposium in August.
Since the last FOMC meeting, economic data has delivered more questions than answers. Inflation has surprised sharply on the upside, while employment growth has underwhelmed, despite record job openings. While job creation has fallen short of the Fed’s expectations, Powell argues that it is due to a lack of supply rather than a dearth of demand. He also argued that bottlenecks and reopening are largely responsible for the surge in inflation. However, he did acknowledge inflation could be higher than expected and longer-term inflation moved into a target range of 2.0%; “if we saw inflation go higher, we would adjust monetary policy.” The Fed’s policy statement repeated that inflation has risen “largely on transitory factors” and that inflation has “run persistently below this longer-run goal.” That said, the committee is carefully monitoring for signs of persistence, paying close attention to inflation expectation measures.
The Summary of Economic Projections (SEP) forecast revealed a significant upward revision to core PCE. Fed officials see their preferred measure of price pressures rising 3.4% in 2021 compared with a March projection of 2.4%. The 2022 forecast rose to 2.1% from 2% and the 2023 estimate was raised to 2.2% from 2.1%. The FOMC median projection for unemployment in the fourth quarter of 2021 remained unchanged at 4.5% and median estimate for 2022 was marked down to 3.8% from 3.9%. The 2023 unemployment estimate was held at 3.5%. The FOMC raised its projections for economic growth. Gross domestic product was seen expanding 7% this year, up from the prior projection of 6.5%. The Fed maintained the 2022 expansion forecast at 3.3% and raised the 2023 estimate to 2.4% from March’s 2.2% projection.
Signaling a hawkish tone, the quarterly median dot plots showed that 13 of 18 fed officials favored at least one rate increase by the end of 2023, versus 7 officials in March. 11 officials saw at least two hikes by the end of 2023. In addition, 7 of them saw a move as early as 2022, up from 4. In his press conference, however, Powell said that the dot plot projections should be taken with a “big grain of salt”.
Bond yields immediately moved higher after the Fed released its updated policy statement and economic projections. The benchmark 10-year Treasury yield rose 8 basis points to 1.55%, while the 2-year Treasury yield briefly breached 0.19% to its highest level in almost a year. The 2-year rate most closely reflect investors’ shifting expectations for Fed policy. |
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Any opinions, projections or recommendations in this report are subject to change without notice and are not intended as individual investment advice. The information in this letter is based on data obtained from recognized sources and is believed to be reliable. Past performance is not indicative of future results. This material is for AMLIP participants and administrators ONLY and is NOT for public distribution.
NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE. NOT A DEPOSIT. NOT INSURED BY ANY FEDERAL OR STATE GOVERNMENT AGENCY
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Portfolio Matters
The month opened with a $427,071,205.65 balance and closed with a balance of $428,766,869.28. The seven-day effective yield ended the month at 0.01%. The monthly seven-day average effective yield for the month was 0.01%. Average maturity ended the month at 34 days.
Comparisons
At the end of the month, the AMLIP portfolio had 28% of its portfolio assets allocated to overnight investments/cash, Corporate & Muni’s made up 6% of the assets, CP represented 26% CD represented 8%, and Treasury & Agency represented 16%. On March 29th, the seven-day compound yield of all taxable money market funds as reported by iMoneyNet, Inc. was 0.01%, the Tier 1 Institutional Compound Yield was 0.03% and the Pool’s 7-day effective rate of 0.01% on the same day. All Pool rates are quoted net of fees and expenses
Fund Composition
Money Market Comparison
AMLIP Membership
There are currently 88 members representing 202 accounts.
Adak, City of
Alaska Association of Municipal
Clerks
Alaska Government Finance
Officers Association (AGFOA)
Alaska Industrial Development
Export Authority
Alaska Municipal League
Alaska Municipal Management
Association
Akutan, City of
Aleknagik, City of
Aleutians East Borough
AML/JIA
Anchorage Community
Development
Anchorage, Municipality of
Annette Islands School District
Angoon, City of
Atka, City of
Atqasuk, City of
Barrow, City of
Bethel, City of
Brevig Mission, City of
Bristol Bay, Borough of
Chevak, City of
Chuathbaluk, City of
Cold Bay, City of
Cordova, City of
Delta Junction, City of
Denali Borough
Dillingham, City of
Eagle, City of
Eek, City of
Egegik, City of
Elim, City of
Fairbanks, City of
Fairbanks North Star Borough
False Pass, City of
Fort Yukon, City of
Gustavus, City of
Haines Borough
Homer, City of
Hoonah, City of
Huslia, City of
Juneau, City and Borough of
Kake City School District
Kenai, City of
Kenai Peninsula Borough |
Ketchikan Gateway Borough
King Cove, City of
Kodiak, City of
Kodiak Island Borough
Kotzebue, City of
Koyuk, City of
Manokotak, City of
Marshall, City of
Matanuska-Susitna Borough
Mekoryuk, Village of
McGrath, City of
Nenana, City of
New Stuyahok, City of
Nightmute, City of
Nome, City of
North Slope Borough School District
Northwest Arctic Borough
Northwest Arctic School District
Nulato, City of
Old Harbor, City of
Palmer, City of
Pelican, City of
Pelican City School District
Petersburg, City of
Pilot Station, City of
Pribilof School District
Quinhagak, City of
Sand Point, City of
Selawik, City of
Seldovia,City of
Seward, City of
Sitka, City and Borough of
Soldotna, City of
Southeast Conference
Southwest Alaska Municipal
Conference
St. Paul, City of
Tenakee Springs, City of
Toksook Bay
Unalakleet, City of
Unalaska, City of
Upper Kalskag
Valdez, City of
Wasilla, City of
Whittier, City of
Wrangell, City and Borough of
Yakutat, City and Borough of |
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