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Page 3 of 7 <br />The effective fiscal year rate of return on the portfolio was 2.13 percent, an increase of 0.70 <br />percent from 1.43 percent from last quarter and an increase of 0.39 percent from 1.74 percent <br />reported at the same time last year. <br /> <br />As reported previously, the Federal Reserve (the Fed) had been raising interest rates since <br />March 2022 but halted rate increases in July 2023. With the recent rate cut of 0.25 percent in <br />December 2025, the Federal Funds Rate target range was lowered to 3.5 percent to 3.75 <br />percent. Some of the securities in the City’s investment portfolio were purchased before the <br />rate hikes, resulting in a lower investment return. The purchases and sales during the quarter <br />were aimed to rebalance the portfolio, with the goal of achieving higher investment returns <br />over time. <br /> <br />As of December 31, 2025, the entire portfolio, exclusive of CDs and LAIF, was held in third- <br />party safekeeping for the benefit of the City of Pleasanton at Bank of New York Mellon. Bank <br />of New York Mellon is a contractual agent for the City. <br /> <br />As of December 31, 2025, 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 />Page 10 of 144