Summary of Investments 31 January 2020 - NSW ...
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Penrith City Council
Summary of Investments
31 January 2020
Commentary
The Reserve Bank of Australia (RBA) met on the 4th February 2020 and the Board decided to
maintain the current cash rate at 0.75%. Though the outcome of the recent meeting of the RBA
board was to uphold current cash rate, they are still in the position to believe that a further rate
cut is necessary in the future. This is to continue the easing of monetary policy that will support
employment growth and provide greater confidence that inflation will be consistent with the
medium-term target.
The current global issue on COVID-19, also known as ‘Corona Virus’, and its effect on the
economy, strengthens the speculation of the impending rate cut in the horizon – with China
being the first country to be affected by the virus. It has been reported, due to the outbreak of
the COVID-19 in China, a ‘lockdown’ and travel restriction were placed on the country. The
decision was brought in the attempt to contain and slow-down the spreading of COVID-19.
Australia has a very close link with China, with the latter being Australia’s largest trading partner
in resource exports. Also, there are significant number of international students and tourists in
Australia are from China. The ‘lockdown’ and travel restriction on the China, would undoubtedly
add pressure to Australia’s, already volatile, economy. This may result to a negative Gross
Domestic Product (GDP) growth in both the first and second quarters of this calendar year.
Long-term government bond yields have further declined and are at record lows, consistent with
several countries, including Australia. Bank funding costs in Australia have also declined, with
money-market spreads having fully reversed the increases that took place last year. Borrowing
rates for both businesses and households are at historically low levels. The Australian dollar is
at the low end of its narrow range of recent times.
Like the December 2019 quarter, the inflation rate for January 2020 remains at 1.8 per cent, in
both headline and underlying terms. Employment growth has continued to be strong. Labour
force participation is at a record level, the vacancy rate remains high and there are reports of
skills shortages in some areas. At the time of writing this report, the unemployment rate for
January 2020 has not been released.
The Council’s portfolio has continued to outperform the 90 Day Bank Bill Swap Rate (BBSW)
benchmark during reportable month of January 2020. Investments will continue to be
monitored closely, to ensure returns are maximised as opportunities become available.
The investment returns versus the benchmark for January 2020 are:
Council portfolio current yield (including FRNs) 1.66%
90-day Bank Bill Swap Rate (Benchmark) 0.89%Penrith City Council
Historical Investment Performance
Table 1
Actual Portfolio Benchmark (BBSW)
Current Portfolio Yield (including FRNs) 1.66% 0.89%
Past 12 Month Portfolio Performance 2.19% 1.25%
Portfolio Return for the Period 0.14% 0.07%
Portfolio Yield (Actual Versus Benchmark)
The annual weighted average income return on investments, to January 2020, was 2.19%. This graph
tracks performance over time and shows that the yield was between 1.66% and 2.72% for the past
year - well above the BBSW over the same period. Weighted yield has continued to drop due to
current term deposits invested at lower rates - between 1.33% and 2.12%.
Graph 1
Investment Portfolio as at 31 January 2020
3.00%
Monthly Net Return Annualised
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20
PCC Monthly Net Return Annualised BBSW Monthly Net Return Annualised
Annual Portfolio (Actual)
The graph below illustrates the annual trend of the Council’s monthly Investment Portfolio balances.
Graph 1.1
Historical Monthly Balance of Investment Portfolio as at 31 January 2020
$180,000,000
$175,000,000
$170,000,000
$165,000,000
$160,000,000
$155,000,000
$150,000,000
Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20Penrith City Council
Investment Summary by Asset Group and Monthly Movement
Table 1.1
Asset Group Closing Value Closing Value
(Face Value) (Face Value)
31 December 2019 31 January 2020
$ % $ %
Current Cash on Call Group (excl General Fund balance) 7,259,920 4.22% 6,418,265 3.94%
Term Deposit Group 141,200,000 82.08% 132,700,000 81.54%
Floating Rate Notes 20,250,000 11.77% 20,250,000 12.44%
Mortgage Backed Securities* 2,151,788 1.25% 2,125,023 1.31%
Sub-Total 170,861,708 161,493,288
General Fund Bank Balance 1,166,763 0.68% 1,247,710 0.77%
Total 172,028,471 100% 162,740,999 100%
* MBS Purchased in 2006/2007 prior to the current Ministerial Investment Order
January 2020 Investments % Allocation by Asset Groups
The graph below illustrates the dissection of the Council’s Portfolio per investment products or categories.
Graph 1.2
Floating Rate Notes,
12.44%
Mortgage Backed
Securities*, 1.31%
General Fund Bank
Balance, 0.77%
Current Cash on Call
Group (excl bank
balance), 3.94%
Term Deposit
Group, 81.54%Penrith City Council
Reconciliation of Invested Funds and Monthly Movement
Table 1.2
Period Ending Period Ending
31 December 2019 31 January 2020
$ $
Represented by:
Externally Restricted Assets
Section 7.11 Developer Contributions 37,384,625 38,090,879
Restricted Contributions for Works 9,005,874 9,061,487
Unexpended Grants* (441,311) 1,326,113
Unexpended Loan Funds 5,943,608 5,942,178
Other Externally Restricted 20,967,145 21,140,399
Total 72,859,941 75,561,056
Internally Restricted Assets - Funding of Operations
Internal Reserves 64,397,557 64,885,149
Security Bonds and Deposits (net)** 8,506,545 8,939,993
Total 72,904,102 73,825,142
Restricted Assets Utilised in Operations
Unrestricted Invested Funds 26,264,428 13,354,801
Total Cash and Investments 172,028,471 162,740,999
*Balance may be in deficit when funds are spent in advance of grant payment date to the Council.
**January 2020 figure net of $13,286,004 Refundable bonds received less $4,779,459 Refundable bonds payable by the Council.
January 2020 Investments % Allocation by Cash Reserve Type
This graph demonstrates the allocation of the Council’s cash reserves.
Graph 1.3
Unrestricted Invested
Funds, 8.21%
Security Bonds and Section 7.11 Developer
Deposits, 5.49% Contributions, 23.41%
Restricted Contributions
for Works, 5.57%
Unexpended Grants*,
Internal Reserves, 0.81%
39.87%
Unexpended Loan Funds,
3.65%
Other Externally
Restricted, 12.99%Penrith City Council
Investment Summary
(Graphed to reflect fund ratings as % of portfolio)
Table 1.3
Credit Exposure Bank/Financial Institution Utilised Portfolio Policy Maximum
$ % %
Short Term
A1+ CBA, NAB, Bankwest, Westpac, TCorp 89,365,976 54.91% 100% (40% per institution)
A1 Macquarie Bank, Suncorp Bank 41,000,000 25.20% 100% (25% per institution)
A2 AMP Bank 10,000,000 6.15% 20% (10% per institution)
Long Term
AA- Deposit Plus Flexible Security (CBA) 7,000,000 4.30% 100% (40% per institution)
AA- Floating Rate Note (CBA) 2,000,000 1.23% 100% (40% per institution)
AA- Floating Rate Note (ANZ) 1,000,000 0.61% 100% (40% per institution)
AA- Floating Rate Bonds (NAB) 1,000,000 0.61% 100% (40% per institution)
A+ Floating Rate Note (Suncorp Metway) 2,000,000 1.23% 60% (20% per institution)
A- Mortgage Backed Securities (Barclays 2,125,023 1.31% 60% (20% per institution)
Capital)
BBB+ Floating Rate Note (Bendigo and Adelaide) 3,000,000 1.84% 20% (10% per institution)
BBB+ Floating Rate Note (Bank of Queensland) * 4,250,000 2.61% 20% (10% per institution)
Total Portfolio 162,740,999 100%
*Investments placed prior to current Ministerial Order
January 2020 Investments % Allocation by S&P Fund Rating
Reflects Standard and Poor’s fund ratings as percentage (%) of the portfolio, to show compliance with the Council’s
Investment Policy objectives of minimising risk.
Graph 1.4
A1, 25.20%
A2, 6.15%
A1+, 54.91%
AA-, 4.30%
AA-, 1.23%
AA-, 0.61%
AA-, 0.61%
A+, 1.23%
A-, 1.31%
BBB+, 2.61%
BBB+, 1.84%Penrith City Council
Diversification of Portfolio
(Graphed to reflect fund ratings as % of portfolio)
Table 1.4
Dealing Bank Short Term Long Term Investment ($) Allocation (%)
NSW TCorp A-1+ AAA 18,019 0.01%
ANZ A-1+ AA- 1,000,000 0.61%
Commonwealth Bank of Australia/Bankwest A-1+ AA- 30,847,957 18.96%
National Australia Bank A-1+ AA- 52,000,000 31.95%
Westpac Banking Corporation A-1+ AA- 16,500,000 10.14%
Barclays Bank A-1 A+ 2,125,023 1.31%
Suncorp Metway A-1 A+ 33,000,000 20.28%
Macquarie Bank A-1 A+ 10,000,000 6.15%
Bendigo and Adelaide Bank A-2 BBB+ 3,000,000 1.84%
Bank of Queensland A-2 BBB+ 4,250,000 2.61%
AMP Bank A-2 BBB+ 10,000,000 6.14%
Total Investment 162,740,999 100%
January 2020 Investment % Allocation by Financial Institutions
Reflects the spread of investments amongst various Financial Institutions to show portfolio diversification in accordance
with the Council’s Policy of risk aversion.
Graph 1.5
AMP Bank NSW TCorp ANZ
Bank of Queensland 6.14% 0.01% 0.61%
Bendigo and 2.61%
Adelaide Bank
1.84%
Commonwealth Bank of
Macquarie Bank Australia/Bankwest
6.15% 18.96%
Suncorp Metway
20.28%
Barclays Bank
1.31%
Westpac Banking National Australia
Corporation Bank
10.14% 31.95%You can also read
