TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Javier Carcamo, Finance Director
PREPARED BY: Tanner Benson, Financial Analyst
SUBJECT:
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Treasurer’s Report - Quarter 4 of Fiscal Year 2025/26
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ABSTRACT
The Fiscal Year 2025/26 Treasurer’s Report for Quarter 4 (April-June 2026) is presented in compliance with California Government Code Section 53646(b) and the City’s Investment Policy. As of June 30, 2026, the City’s investment portfolio had a total market value of $159.8 million, a book value of $157.6 million, and a stable yield-to-maturity of 4.27%. The LAIF balance totaled $62.8 million, with a yield of 3.812%. The Wells Fargo Cash Sweep Program and JPMorgan Account generated $564k in quarterly earnings.
RECOMMENDATION
recommendation
Receive the Fiscal Year 2025/26 Treasurer’s Reports for Quarter 4 (April - June 2026).
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PRIOR ACTION/VOTE
On August 19, 2025, the City Council received the Treasurer’s Report for Quarter 4 of Fiscal Year 2024/25.
On November 18, 2025, the City Council received the Treasurer’s Report for Quarter 1 of Fiscal Year 2025/26.
On February 17, 2026, the City Council received the Treasurer’s Report for Quarter 2 of Fiscal Year 2025/26.
On June 2, 2026, the City Council received the Treasurer’s Report for Quarter 3 of Fiscal Year 2025/26.
STRATEGIC ALIGNMENT
This item aligns with the City Council to: maintaining a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency relating to an administrative priority.
DISCUSSION
Pursuant to Government Code Section 53646(b) and the City of Murrieta (City) Investment Policy, the Finance Department renders a quarterly investment report to the City Council concerning the investment portfolio’s earnings and performance results. The City contracts with Chandler Asset Management to manage the City’s investment portfolio and to advise on all investment-related matters. The purpose of this report is to present the investment earnings for the period April 1, 2026, through June 30, 2026 (Quarter 4).
Total Portfolio Composition
The portfolio comprises available cash balances from over 100 separate funds. The balances are tracked in the City’s financial records individually but combined for the purpose of investing cash to maximize investment returns. The City’s investment manager invests funds not needed in the near future into securities with maturities of less than five years. The City also utilizes the Local Agency Investment Fund (LAIF), an investment pool operated by the State of California and used by most cities in California to manage the City’s short-term cash flow requirements. Wells Fargo’s “Cash Sweep Program” is the City’s third investment tool and it allows the City to earn a return on uninvested cash balances in our General Checking Account by automatically "sweeping" cash balances into a Sweep investment vehicle until such balances are otherwise needed to satisfy obligations arising in the account. The Cash Sweep Program exclusively targets high-quality, short-term, U.S. dollar-denominated money market instruments that consist of U.S. Government obligations and repurchase agreements collateralized by U.S. Government obligations. This complies with our Investment Policy and California Government Code
Section 53607.
Investment Portfolio Performance
As of June 30, 2026, the City’s total market value (including accrued interest) of operating funds and liquidity investments totaled $159,799,387.07. The book value, or what the City actually paid for the investments, totaled $157,564,652.09. The fair market value of the City’s portfolio, less accrued interest, totaled $158,458,247.15. The value of fixed-income securities may fluctuate with changes in interest rates. As interest rates go up, the market value of the securities may go down, and the reverse is true; when interest rates go down, the market value of the securities may go up. The difference between the book and fair market value is considered an unrealized gain or loss. The unrealized gain for this reporting period is $893,595.06. It is important to note that a loss or gain is realized when an investment is redeemed or sold before its maturity date. City’s investments are retained until the maturity date. Nonetheless, the City may elect to sell an investment before its maturity and record a capital gain or loss to manage the portfolio's quality, liquidity or yield in response to market conditions or City’s risk preferences. The portfolio’s total market value (including accrued interest) increased by $828,254.96 from higher investment income, offset by the increase in interest rates.
As of June 30, 2026, the yield to maturity on the portfolio decreased to 4.27% from 4.32% on March 31, 2026. During the fourth quarter of FY2025-26, US Treasury yields increased across the curve on oil-related inflation concerns. The 2-year US Treasury Note yield increased to 4.15% from 3.79%, while the 5-year Treasury increased to 4.19% from 3.92% over the reporting period. The Iranian conflict and the disruption of traffic through the Strait of Hormuz entered its third month, disrupting oil supply and causing headline CPI to accelerate to its fastest pace in more than three years. The Federal Reserve unanimously held the target Fed Funds rate range at 3.50-3.75% referencing Middle East tensions and energy supply disruptions while removing prior forward guidance that had suggested a bias toward rate cuts. This quarter, the portfolio benefited from high interest earnings on fixed income securities and the higher reinvestment rate environment. The portfolio remains stable due to the high-quality assets contained within the portfolio.
Portfolio Duration
The investment portfolio had an average duration of 1.78 years as of June 30, 2026. The portfolio duration remains within an acceptable range. The City continues to implement a disciplined, conservative approach to its portfolio in this time of financial market volatility.
Asset Allocation
The investment portfolio is allocated in compliance with California Government Code 53601. The sector allocation of the portfolio on June 30, 2026, was 15.35% in US Government Agency bonds, 26.16% in high-grade Corporate Bonds, 39.10% in U.S. Treasury bonds, 8.20% in Asset-Backed Securities (ABS), 1.15% in Supranational, 9.16% in Agency Collateralized Mortgage-Backed Securities, and 0.43% Money Market Fund. Supranational is a financial institution owned by member countries to promote international development.
The following pie chart summarizes the asset allocation by sector.
(The chart above may not sum to 100% due to rounding.)
Maturity Distribution
As of June 30, 2026, approximately 22.54% of the portfolio will mature in less than 1 year, 22.70% will mature in 1-2 years, 30.49% from 2-3 years, 20.48% from 3-4 years, and 3.77% from 4-5 years. The City’s portfolio maintains liquid funds through bank deposits, money market funds, and local government investment pools to satisfy its near-term liquidity needs.
(The chart above may not sum to 100% due to rounding.)
LAIF Balance
Funds deposited with LAIF serve as the City’s savings account, enabling the regular investment of short-term cash balances. LAIF complements our investment program by maximizing the earnings on liquid balances not needed for immediate disbursement. It also allows the City’s investment manager to focus on maximizing the return on its longer-term investments.
The balance in LAIF, as of June 30, 2026, was $62,774,278.85. The annual yield on the LAIF portfolio was 3.812%, down 0.462% from the 4.274% earned at the end of June 2025.
Wells Fargo Cash Sweep Program
The Cash Sweep Program may include fixed, floating, or variable interest rates. The security selections for the Cash Sweep Program are based on several factors, including credit quality, yield, and maturity, while considering the fund’s overall liquidity and its weighted average maturity. The securities purchased are considered to present minimal credit risk. For the quarter ending June 30, 2026, the total cumulative earnings from the Cash Sweep Program were $494,829.85, with an Average Daily Yield of 3.569%.
JPMorgan Chase Balance
JPMorgan is not using a classic sweep account, but rather a Hybrid checking account. The Hybrid checking account offers functionality similar to an overnight sweep service. In the Hybrid checking account, balances earn an earnings credit allowance up to a predetermined threshold to offset bank service fees, with balances above that threshold earning hard-dollar interest. Thus, instead of sweeping the excess balance to a separate account each night, it remains in the checking account and earns interest.
In January, the City transferred $5,000,000 to begin the transition from Wells Fargo to JPMorgan. The balance in JPMorgan, as of June 30, 2026, was $25,994,569.86. The City began earning interest on the transferred funds and ended the quarter with cumulative interest earnings of $69,157.34 and an Average Daily Yield of 2.65%.
The graph below compares the investment yields for the Investment Portfolio, LAIF, and the Cash Sweep Program for the period ending June 30, 2025, to June 30, 2026. As shown in the table below, investment yields are responding to the Fed's rate reductions. The yield has decreased by approximately 50 basis points on average compared to last year.
This report presents only the results of the operating portfolio managed by Chandler Asset Management, LAIF, and the Cash Sweep Program. The City’s and developer bond portfolios are available for review in the Finance Department or may be sent to the City Council upon request.
In compliance with the California Government Code Section 53646, the Treasurer of the City of Murrieta hereby certifies that sufficient investment liquidity and anticipated revenues are available to meet the City’s budgeted expenditure requirements for the subsequent six months, July through December 2026. All investments in the City’s portfolio comply with state law and the City’s adopted Investment Policy.
PUBLIC NOTICING
The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
CEQA AND REGULATORY OVERVIEW
This action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly.
PUBLIC NOTICING
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
CEQA AND REGULATORY OVERVIEW
This action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly.
FISCAL IMPACT
There is no fiscal impact associated with the recommended action.
ATTACHMENTS
ATT 1 - City of Murrieta Investment Report June 30, 2026
ATT 2 - LAIF Regular Monthly Statement June 30, 2026
ATT 3 - Wells Fargo Sweep Account Statements for April, May, and June 30, 2026
ATT 4 - JPMorgan Chase Account Statements for April, May, and June 30, 2026
ATT 5 - Portfolio Composition Chart as of June 30, 2026