PORTFOLIO PERFORMANCE, DIVERSIFICATION, AND STRATEGY
October portfolio yielded 3.48%, up from 2.97% last year, with a weighted average maturity of 929 days.
Total assets under management of $16.7 billion, up $1.2 billion in comparison to October 2023.
The total portfolio contained 73.5% in U.S. Treasurys, 3.5% in U.S. government agencies, 13.5% in mortgage-backed securities, 8.5% 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.
“Total portfolio yields are lower than current yields due to the laddered structure of the investments over a 3 year average.” STATE TREASURER, TODD RUSS
TOTAL FUNDS INVESTED
Funds available for investment at market value include the State Treasurer’s investments at $12,660,806,681 and State Agency balances in OK Invest at $4,049,289,436, for a total of $16,710,096,117.
MARKET CONDITIONS
Treasury yields were mixed in October. The 2-year and 10-year note yields rose 0.53% and 0.50% respectively to 4.17% and 4.29%. The 3-month treasury bill, which fell 0.08% in the month to 4.55%, is moving toward the 10-year note as the yield curve, a visual relationship of U.S. interest rates and the maturity dates of treasury securities, is undergoing a process of disinversion.
Indexes broadly declined in October alongside meager corporate earnings reports and weak future corporate guidance. Investors were broadly bearish ahead of the election as the market was injected with uncertainty of how policies like increased capital gains taxes or universal tariffs would affect markets.
At the November meeting the Federal Reserve approved a 0.25% rate cut bringing the benchmark federal funds rate down to a range between 4.5% and 4.75%. The Federal Open Market Committee (FOMC) is cutting rates to achieve the dual mandate of maximum employment and price stability. From the outside, it appears that the Fed is making an effort to stay ahead of disinflation and safe from an economic recession. As of the publishing date of this report, the market is expecting a 57% change of a 0.25% rate cut at the FOMC’s December meeting, according to the CME FedWatch tool.
ECONOMIC DEVELOPMENTS
In October the headline unemployment rate was unchanged at 4.1%. However, non-farm payrolls rose the slowest since December 2020 adding just 12,000 jobs to the economy. The August and September jobs reports were revised downward by a combined 112,000 jobs per the U.S. Bureau of Labor Statistics. Economists will be on the lookout for revisions as this data was collected just after Helene and during the Milton hurricanes. Strikes, particularly in the transportation manufacturing industry, may have also had significant effects on this report. Despite the sour headline, the Federal Reserve saw more signs of a stabilizing labor market within it.
The consumer price index (CPI) rose to 2.6% for the year ending in October. Core CPI, which excludes volatile food and energy prices, increased 3.3% over the same period. The Bureau of Labor Statistics reported that the rising cost of shelter accounted for over half of the change in CPI. Core personal consumption expenditures (PCE), the Fed’s preferred measure of inflation increased 2.1% over 12 months ending in September. The producer price index (PPI) increased 0.3% in October after revising September up 0.2%. Final demand services increased 0.3% in October and over one-third of the rise can be attributed to a 3.6% increase in prices for portfolio management.
Retail sales growth measured 0.4% in October and was revised up to 0.8% in September. For the year ended in October, retail sales were up 2.3%. This month’s growth came in above expectations of 0.3% per The Wall Street Journal. The Census Bureau reports, “Nonstore retail sales were up 7.0% from last year while food services and drinking places were up 4.3% from October 2023”. An increase of 1.6% in auto sales drove much of this month’s growth. The Associated Press reports, “though some of October’s rise in retail sales reflected higher prices, it mainly indicated increased purchases”.
In September, the National Association of Realtors reports existing home sales decreased -1.0% in August to a seasonally adjusted annual rate of 3.84 million homes, down 3.5% from last year. Total housing inventory increased to 1.39 million, up 23.0% from a year ago. The average 30-year fixed rate mortgage is 6.78% down 0.66% from a year ago. The median existing home sales price in September was $404,500 down 2.3% from last month.
In the third quarter of 2024 gross domestic product (GDP) growth was 2.8%. Compared to second-quarter GDP growth of 3.0% (revised), Q3 saw slight drop in fixed investment and inventory growth. The Bureau of Economic Analysis reports, “compared to the second quarter, the deceleration in real GDP in the third quarter primarily reflected a downturn in private inventory investment and a larger decrease in residential fixed investment”. The increase in consumer spending was led by prescription drugs and healthcare outpatient services.
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.
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
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