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Public Fund Investing 2010. Puget Sound Finance Officers Association Doug Extine Deputy State Treasurer February 10, 2010. Agenda. Where are we and how did we get here? When will we leave and where will we go? How will we get there? How long will it take to get there? - PowerPoint PPT Presentation
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Public Fund Investing 2010Public Fund Investing 2010
Puget Sound Puget Sound
Finance Officers Finance Officers
Association Association Doug ExtineDoug Extine
Deputy State TreasurerDeputy State Treasurer
February 10, 2010February 10, 2010
AgendaAgenda
Where are we and how did we get Where are we and how did we get here? here?
When will we leave and where will When will we leave and where will we go?we go?
How will we get there?How will we get there? How long will it take to get there?How long will it take to get there? How can I prepare for the trip?How can I prepare for the trip?
AgendaAgenda
The current interest rate cycleThe current interest rate cycle Can past cycles tell us what to expect Can past cycles tell us what to expect
going forward?going forward? How can I effectively manage my How can I effectively manage my
portfolio over the next year or two?portfolio over the next year or two? What can I learn from this that will What can I learn from this that will
make me better in the future?make me better in the future? The value of disciplineThe value of discipline
OST NEWSOST NEWS 2010 Legislative Agenda2010 Legislative Agenda
LGIP LGIP OST CD ProgramOST CD Program
Update on the PDPC and the TAG ProgramUpdate on the PDPC and the TAG Program SEC proposed changes to 2a-7 guidelinesSEC proposed changes to 2a-7 guidelines
Weighted Average Maturity (WAM)Weighted Average Maturity (WAM) Weighted Average Life (WAL)Weighted Average Life (WAL) Liquidity MandatesLiquidity Mandates
LGIP Extended Asset OptionLGIP Extended Asset Option
Portfolio Management 2010Portfolio Management 2010
Objectives - Safety, liquidity and yieldObjectives - Safety, liquidity and yield There is no map for this tripThere is no map for this trip Drive defensivelyDrive defensively
Risk in the current environment is quite Risk in the current environment is quite asymmetricalasymmetrical
MANAGE YOUR DURATIONMANAGE YOUR DURATION Keep your eyes on the right benchmarkKeep your eyes on the right benchmark
Where Are We And How Did We Get Where Are We And How Did We Get Here?Here?
Where Are We And How Did We Get Where Are We And How Did We Get Here?Here?
Where Are We And How Did We Get Where Are We And How Did We Get Here?Here?
Where Are We And How Did We Get Where Are We And How Did We Get Here?Here?
Where Are We And How Did We Get Where Are We And How Did We Get Here?Here?
Where Are We And How Did We Get Where Are We And How Did We Get Here?Here?
Portfolio Management 2010Portfolio Management 2010
Objectives - Safety, liquidity and yieldObjectives - Safety, liquidity and yield There is no map for this tripThere is no map for this trip Drive defensivelyDrive defensively
Risk in the current environment is quite Risk in the current environment is quite asymmetricalasymmetrical
MANAGE YOUR DURATIONMANAGE YOUR DURATION Keep your eyes on the right benchmarkKeep your eyes on the right benchmark
What Does History Tell Us?What Does History Tell Us?Yield Curves and the Last CycleYield Curves and the Last Cycle
What Does History Tell Us?What Does History Tell Us?Yield Curves and the Last CycleYield Curves and the Last Cycle
What Does History Tell Us?What Does History Tell Us?Yield Curves and the Last CycleYield Curves and the Last Cycle
What Does History Tell Us?What Does History Tell Us?Yield Curves and the Last CycleYield Curves and the Last Cycle
Portfolio Management 2010Portfolio Management 2010
Objectives - Safety, liquidity and yieldObjectives - Safety, liquidity and yield There is no map for this tripThere is no map for this trip Drive defensivelyDrive defensively
Risk in the current environment is quite Risk in the current environment is quite asymmetricalasymmetrical
MANAGE YOUR DURATIONMANAGE YOUR DURATION Keep your eyes on the right benchmarkKeep your eyes on the right benchmark
Market Expectations: Interest Rates to Market Expectations: Interest Rates to IncreaseIncrease
Interest Rates Can Increase Interest Rates Can Increase Rapidly Rapidly
Even With No Fed ActivityEven With No Fed Activity2-year Treasury Yields2-year Treasury Yields
2-year Treasury leads Fed moves in tightening cycles by ~ 6 months2-year Treasury leads Fed moves in tightening cycles by ~ 6 months
Portfolio Management 2010Portfolio Management 2010
Objectives - Safety, liquidity and yieldObjectives - Safety, liquidity and yield There is no map for this tripThere is no map for this trip Drive defensivelyDrive defensively
Risk in the current environment is quite Risk in the current environment is quite asymmetricalasymmetrical
MANAGE YOUR DURATIONMANAGE YOUR DURATION Keep your eyes on the right benchmarkKeep your eyes on the right benchmark
MANAGE YOUR DURATION MANAGE YOUR DURATION Beware of the Pretty MushroomsBeware of the Pretty Mushrooms
MANAGE YOUR DURATION MANAGE YOUR DURATION Beware of the Pretty MushroomsBeware of the Pretty Mushrooms
Callables
Bermudan 2yr 3yr 4yr 5yr
0.25 1.15 1.89 2.51 3.02
0.5 1.13 1.87 2.48 2.98
1 1.09 1.81 2.43 2.94
2 1.72 2.31 2.80
Callables
Euro 2yr 3yr 4yr 5yr
0.25 1.07 1.75 2.29 2.73
0.5 1.10 1.79 2.36 2.82
1 1.08 1.78 2.36 2.83
2 1.71 2.28 2.77
Yield
2 Year 3 Year
Treasury Note 0.81 1.31
Agency Bullet 0.984 1.63
Investing Out the Curve – Timing Does Investing Out the Curve – Timing Does MatterMatter
Investing Out the Curve – Timing Does Investing Out the Curve – Timing Does MatterMatter
Investing Out the Curve – Timing Does Investing Out the Curve – Timing Does MatterMatter
Investing Out the Curve – Timing Does Investing Out the Curve – Timing Does MatterMatter
Investing out the CurveInvesting out the CurveThe Value of Discipline … and Keeping Your Eyes on The Value of Discipline … and Keeping Your Eyes on
the Right Benchmarkthe Right Benchmark
Investing out the CurveInvesting out the CurveThe Value of Discipline … and Keeping Your Eyes on The Value of Discipline … and Keeping Your Eyes on
the Right Benchmarkthe Right Benchmark
Investing out the CurveInvesting out the CurveThe Value of DisciplineThe Value of Discipline
Investing out the CurveInvesting out the CurveThe Value of DisciplineThe Value of Discipline
Portfolio Management 2010Portfolio Management 2010
Objectives - Safety, liquidity and yieldObjectives - Safety, liquidity and yield There is no map for this tripThere is no map for this trip Drive defensivelyDrive defensively
Risk in the current environment is quite Risk in the current environment is quite asymmetricalasymmetrical
MANAGE YOUR DURATIONMANAGE YOUR DURATION Keep your eyes on the right benchmarkKeep your eyes on the right benchmark
