Miami-Dade County’s investment portfolio earned a healthy $47.3 million in fiscal 2021-2022, a $37.6 million increase over fiscal 2020-2021, reports Christopher Hill, the county’s director of cash management.
The earnings reflect an average return of 0.61% for the fiscal year ended Sept. 30, 2022, Mr. Hill said, taking the county’s portfolio balance to $7.8 billion.
“As of Jan. 1, 2023, the investment portfolio is earning a month-to-date rate of 3.76%, implying another substantial earnings increase for the current fiscal year,” Mr. Hill forecast to Miami Today.
Anticipating the Federal Reserve taking a less aggressive stance in raising interest rates in 2023, he said the county may look at extending maturities “when investment opportunities present themselves.”
Mr. Hill’s caveat to any investment, however, is the county’s main investment objective: “Maintaining liquidity and safety of principal.” The county “strives to maximize income,” he notes, but that is “secondary to the main objective.”
Maturity is the date when the life of a financial instrument ends. Lengthening the average maturity, explains federalreserve.gov, reduces “the supply of longer-term Treasury securities in the market, which should put downward pressure on longer-term interest rates,” the site explains, and “contribute to a broad easing in financial market conditions that will provide additional support for the economic recovery.”
“One reason to consider extending maturities,” Mr. Hill told Miami Today, “would be to lock in current rates for a longer period of time if you believe the Fed may start to lower rates,” as in a recession.
“Recent forecasts call for the Fed to continue raising rates for the first half of 2023, then to hold for the rest of 2023 and begin to cut rates in 2024 and 2025,” he said. “The county expects its portfolio’s weighted average days to maturity to remain relatively short for the first quarter of 2023, while beginning to extend maturities where prudent … as 2023 progresses.”
Mr. Hill warns that “it is very difficult to predict what interest rates will do and market conditions are always changing. If, or when that occurs, the county’s “strategy will need to be adjusted accordingly.”