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
John “Jay”
Sweeney III,
Finance Director
City and Borough of Sitka
Term 11/22
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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As expected, the Federal Open Market Committee (“FOMC” or “The Fed”) left the federal funds target rate unchanged 0.00% to 0.25%. The Fed also left interest in overnight reserves (IOER) at 0.10% and the discount rate at 0.25%. Overall, the message was dovish in terms of implication for the Fed’s reaction function.
No changes were made to monetary policy and guidance. In his press conference, Chairman Powell noted that COVID-19 is still causing tremendous hardship, big sectors of the economy are still weak, inflation is still low and financial conditions remain accommodative thanks in part to the policy support of both the Fed and Congress.
However, some tweaks were made by the Committee. One of those being the CMBS purchase program. Starting March 23rd, the New York Fed will no longer conduct CMBS purchases as the market is functioning smoothly. The commitment to buy residential MBS and U.S. Treasuries remains unchanged. Secondly, the Fed increased the per-counterparty limit on reverse repurchase operations from $30 billion a day to $80 billion a day, which will allow the Fed to drain cash more effectively from money markets. This should have a similar effect to increasing IOER, as IOER did not change at this meeting. Chairman Powell did not address the Supplementary Leverage Ratio (SLR) as today was about monetary policy decisions and not regulatory policy decisions. The Fed does not have full authority of SLR as it is shared with the FDIC and OCC. SLR was introduced by the Basel Committee in 2010 and it was finalized in 2014. It considers both on and off-balance sheet assets and exposures, as U.S. banking organizations have long been subject to a leverage capital requirement.
All eyes were on the dot plots or the Fed’s forward-looking forecasts which were revised, and the main reason for the revisions is the just-passed $1.9 trillion stimulus package. The package is worth 9% of GDP which was not incorporated in the December Summary of Economic Projections (SEP). As expected, Fed officials made conservative assumptions about fiscal multipliers which lead to a significant forecast upgrade. The 2021/2022 GDP projections rose to 6.5%/3.3% respectively from 4.2%/3.2% as of December. In addition, Fed officials see the unemployment rate at 4.5% and inflation at 2.4% for 2021. Regardless of inflation meeting and exceeding their 2% goal, the Fed will continue to remain accommodative and will maintain the median Federal Funds rate forecast through 2023.
Despite the continued pressure on the long end of the Treasury curve, Fed officials did not make any tweaks to the asset purchase program. Asset purchases remain on pace (treasuries $80 billion/month, mortgages $40 billion/month). Any such move would have been out of step with the upward growth revisions, and Chairman Powell has made it clear that the Fed would only intervene if financial conditions tightened meaningfully. The spillover to other asset classes has been minimal so far, and overall financial conditions remain very accommodative.
All that said, with the stimulus package passing and checks already arriving in the consumer’s hands, the bank accounts of consumers, expectations of continued strong data, continued heavy supply and what appears to be a very relaxed Fed as rates will continue to be accommodative for the very near term. The Fed continues to remain a key wildcard. Ironically, the more disorderly markets become the more a rate move becomes a possibility as it is more likely the Fed will change its relaxed stance. To the extent the market has questions regarding the “Fed Put,” that put has usually been tested boosting asset prices and propping up markets.
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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 $548,289,016.89 balance and closed with a balance of $490,638,841.40. 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 31% of its portfolio assets allocated to overnight investments/cash, Corporate & Muni’s made up 9% of the assets, CP represented 32% CD represented 11%, 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 0.02%, 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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