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Page 3 of 6 <br /> <br /> <br />The effective fiscal year rate of return on the portfolio was 1.74 percent, a decrease of 0.13 <br />percent from 1.87 percent from last quarter and an increase of 0.25 percent from 1.49 percent <br />reported at the same time last year. <br /> <br />As reported previously, the Federal Reserve (the Fed) has been raising interest rates since <br />March 2022 but halted rate increases in July 2023. In 2022, the Fed raised rates seven times <br />for a total of 425 basis points, and in 2023 the Fed raised another 100 basis points in total, <br />with federal funds rate in a range of 5.25 percent to 5.50 percent, the highest levels in 25 <br />years, resulting in even higher comparative market rates. Most of the securities in the City’s <br />investment portfolio were purchased before the rate hikes, and the overall investment return is <br />expected to be lower than the market rates in the near term. As securities mature and funds <br />are reinvested, the City will be able to achieve higher investment returns. The Fed is expected <br />to keep the rate steady at 4.25 percent - 4.5 percent, pausing its rate-cutting cycle after three <br />consecutive reductions in 2024. <br /> <br />As of December 31, 2024, the entire portfolio, exclusive of money market accounts and LAIF <br />was held in third-party safekeeping for the benefit of the City of Pleasanton at Bank of New <br />York Mellon. Bank of New York Mellon is a contractual agent for the City. <br /> <br />As of December 31, 2024, all investments in the portfolio are authorized by State of California <br />Government Section 53600 et. Seq. and the City's investment policy. <br /> <br />Securities rated below "AA-/AA3" <br /> <br /> <br /> <br />Note that the medium term note with 3M Company is rated at A by Moody's and rated at BBB+ <br />by S&P. A rating of A indicates the investment grade is very high and a rating of BBB+ <br />indicates the investment grade is good. When this investment was purchased in 2019, it met <br />the A rating category required by the City's investment policy. This investment is scheduled to <br />mature in February 2025. Staff has been monitoring this investment and will take action, such <br />as selling the security before maturity, if warranted. <br /> <br />Page 171 of 749