PORTFOLIO PERFORMANCE, DIVERSIFICATION, AND STRATEGY
June portfolio yielded 3.35%, up from 2.55% last year, with a weighted average maturity of 987 days.
Total assets under management of $16.3 billion, up $900 million in comparison to June 2023.
Total portfolio contained 71% in U.S. Treasurys, 5% in U.S. government agencies,
15% in mortgage-backed securities, 8% money market mutual funds, 0.2% in certificates of deposit,
and 0.8% in state bond issues and foreign bonds, comprising the balance of funds invested.
“Yields will continue to grow as the portfolio sheds the older investments and takes on the influence of the new rate range. Earnings from the Treasury portfolio show historic record highs.”
STATE TREASURER, TODD RUSS
FY 2023
Revenue Actual
$ 219,933,270
Revenue Estimate
$ 186,000,000
Up $33,933,270 or 18.24%
FY 2024
Revenue Actual
$ 376,081,304
Revenue Estimate
$ 334,000,000
Up $42,081,304 or 12.60%
TOTAL FUNDS INVESTED
Funds available for investment at market value include the State Treasurer’s investments at $12,412,332,151 and State Agency balances in OK Invest at $3,972,739,644, for a total of $16,385,071,795.
MARKET CONDITIONS
Treasury yields dipped across the board by the end of June. The yield on the 10-year treasury, which influences interest rates on mortgages and other consumer loans, dropped 0.10% to 4.40%. The 2-year treasury fell by 0.12% to 4.75%. The segment of the yield curve from 2 to 10-years continued to be inverted since the Federal Reserve began raising interest rates more than 2 years ago.
The first six months of 2024 reflected strong returns for the S&P 500, Dow Jones and Nasdaq. The last day of June was volatile for the equity markets possibly due to signs of cooling inflation and the current political environment. The S&P finished the month with a 3.5% gain, the Nasdaq came in at 6.0% and the Dow returned 1.1%.
The minutes from the Federal Reserve meeting held on June 11-12 were released showing there was not enough evidence that inflation was lowering enough to begin reducing interest rates. The meeting summary said, “Participants affirmed that additional favorable data were required to give them greater confidence that inflation was moving sustainably toward 2 percent.” The Fed updated their dot plot, which records each official’s projection for short-term interest rates, indicating one quarter percentage point cut by the end of 2024. This was in comparison 3 rate cuts following the last dot plot update made in March.
ECONOMIC DEVELOPMENTS
The economy added more jobs than anticipated with 206,000 nonfarm payrolls created during June. Reuters reported that government and healthcare services hiring made up about three-quarters of the payrolls gain. The initial jobs number for May was significantly revised down to 218,000 from 272,000. The unemployment rate unexpectedly rose from 4% to 4.1% and tied for the highest level since October 2021. Average hourly earnings increased 0.3% in June and 3.9% on an annualized basis, reflecting economist estimates.”
The consumer price index (CPI) fell 0.1% on a month-over-month basis, after being unchanged in May. Over the last 12 months it was at 3% reflecting a .30% decline. The CPI came in lower than anticipated by most economists. The core CPI, which strips out food and fuel prices, was at 3.3% compared to a year earlier. According to the New York Times, “Officials have spent months waiting for evidence that shelter costs are cooling, because they make up a big chunk of overall inflation and tend to move slowly. That finally happened in the June data. Adding to the good news, travel-related services like airline fares and hotel rooms outright fell in price, and a range of other service costs climbed more slowly.” The Bureau of Labor Statistics reported the producer price index (PPI) for final demand increased 0.2% in June, on a seasonally adjusted basis. This was in comparison to prices being unchanged in May and gaining 0.5% in April. “In the 12 months through June, the PPI increased 2.6%.”, as reported by Reuters. Although it was a gain it was lower than expected. On a monthly basis, core PPI came in subdued at 3.1% reflecting a decline of 0.1% over the previous month.
Retail sales for May gained only 0.1% month-over-month, on a seasonally adjusted basis, and April was downwardly revised by 0.2%. “Sales of sporting goods, hobby, musical instrument and books recorded the biggest increase, followed by clothing, motor vehicle and part dealers and nonstore retailers,” according to Trading Economics. A decline in sales occurred during the month at gasoline stations, furniture stores and food services and drinking places.
Existing home sales, which are comprised of completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 0.7% in May compared to the previous month. On an annual basis, seasonally adjusted home sales were at 4.11 million reflecting a dip of 2.8% from one year ago. “The combination of high home prices and elevated mortgage rates has proved to be challenging for the housing market, weighing down sales activity. Despite record-high home equity, existing homeowners have largely avoided moving to hold on to their existing low mortgage rate”, as reported by Realtor.com.
The first quarter of 2024 gross domestic product (GDP) was upwardly revised by 0.1% to an annual rate of 1.4% in comparison to 3.4% the previous quarter. According to the Bureau of Economic Analysis the first quarter gain was due to “increases in consumer spending, housing investment, business investment, and state and local government that were partly offset by a decrease in inventory investment. Imports, which are a subtraction in the calculation of DGP, increased”.
COLLATERALIZATION
All funds under the control of this office requiring collateralization were secured at rates ranging from 100% to 110%, depending on the type of investment.
PAYMENTS, FEES AND COMMISSIONS
Securities were purchased or sold utilizing competitive bidding. Bank fees and money market mutual fund operating expenses are detailed in the attached pages, as is the earnings split between the State Treasurer and the master custodian bank on securities lending income.
Best regards,
TODD RUSS
STATE TREASURER
cc: The Honorable Kevin Stitt, Governor
The Honorable Charles McCall, Speaker of the House
The Honorable Greg Treat, President Pro Tempore
The Honorable Gentner Drummond, Attorney General
The Honorable Cindy Byrd, State Auditor and Inspector
View full report below.
2024 June Investment Report.pdf
