PORTFOLIO PERFORMANCE, DIVERSIFICATION, AND STRATEGY
March portfolio yielded 3.62%, up from 3.14% last year, with a weighted average maturity of 808 days.
Total assets under management of $17.4 billion, up $1.8 billion in comparison to March 2024.
Total portfolio contained 66% in U.S. Treasurys, 2.8% in U.S. government agencies,
12.1% in mortgage-backed securities, 18% money market mutual funds, 0.2% in certificates of deposit,
0.8% in state and foreign bonds and 0.1% in the IntraFi CD Program, comprising the balance of funds invested.
TOTAL FUNDS INVESTED
Funds available for investment at market value include the State Treasurer’s investments at $12,256,288,869 and State Agency balances in OK Invest at $3,199,625,453, American Rescue Plan investments at $1,114,276,260, and the Oklahoma Capitol Improvement Authority Legacy Fund at $796,009,043 for a total of $17,366,139,625.
MARKET CONDITIONS
In March the 2-year treasury note fell 0.11% to 3.89% and the 10-year treasury note was unchanged at 4.21%. Treasuries were mixed as bond market volatility increased and demand for U.S. government bonds increased. The yield curve, a visual relationship between treasury security yields and maturities steepened as short-term maturity yields fell, and long-term yields increased indicating some direction towards normal.
In March, the S&P 500, Dow Jones, and Nasdaq fell by 5.8%, 4.2%, and 8.1%, respectively. Volatility, as measured by the Chicago Board Options Exchange’s Volatility Index, was high, driven by a narrative of uncertainty and fears of recession, stagflation, and tariff policy. This, combined with declining consumer sentiment, weakened investors’ confidence in the Fed’s ability to manage fiscal policy during unanticipated inflation and trade war.
On March 19th the Federal Open Market Committee (FOMC) voted to maintain the current target federal funds rate at 4.25-4.50% and slow the pace of decline of its securities holdings. In an official statement, the Fed reported that economic activity was expanding at a solid pace, unemployment was stable and low, and that inflation was somewhat elevated. The Committee underlined their monitoring of the economic outlook and preparation to adjust monetary policy if appropriate risks emerge.
ECONOMIC DEVELOPMENTS
In March, unemployment rose to 4.2% from 4.1% in February. According to the Bureau of Labor Statistics, total non-farm payroll employment increased by 228,000 jobs in March, coming in above consensus expectations of 140,000 jobs. Employment increased in health care, social assistance, and transportation and warehousing. Employment in January February was revised downwards by a combined 48,000 jobs.
The consumer price index (CPI) fell 0.1% in March and 2.4% for the year, the smallest 12-month increase since March 2021. The Bureau of Labor Statistics wrote, “the indexes for airline fares, motor vehicle insurance, used cars and trucks, and recreation were among the major indexes that decreased in March”. Annual core personal consumption expenditures (PCE), the Fed’s preferred measure of inflation was 2.5% in February and revised down to 2.5% in January. The producer price index (PPI) decreased 0.4% in March. Over 70% of the decrease can be traced to prices for final demand goods led by the 11.1% drop in prices for gasoline.
Retail sales adjusted for seasonal variation rose 1.4% in March and were unchanged at 0.2% for February. This month’s growth came in above economists’ forecast of 1.3%. The increase partly reflects a jump in car and car-part sales, up 8.8% from last year. Building materials and garden supplies rose 3.3% and sporting goods and hobby stores sales increased 2.4% for the month.
In February, the National Association of Realtors reported existing home sales rose 4.2% to a seasonally adjusted annual rate of 4.26 million homes, down 1.2% from last year. Total housing inventory rose to 1.24 million. At the end of February, the average 30-year fixed rate mortgage was 6.76%, down 2.6% from a year ago. The median existing home sales price in February was $398,400, up 3.8% from last year.
The U.S. economy, measured by real GDP, expanded at a 2.4% annualized rate in Q4, in comparison a Q3 increase of 3.1%. The Bureau of Economic Analysis writes, “the increase in real GDP in the fourth quarter primarily reflected increases in consumer spending and government spending that were partly offset by a decrease in investment. Imports, which are a subtraction in the calculation of GDP, decreased”.
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.
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