Summary of Investments 31 May 2022
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Penrith City Council
Summary of Investments
31 May 2022
Commentary
The Reserve Bank of Australia (RBA) met on 08 June 2022 and the Board decided to increase the current cash
rate to 0.85% – 50 basis points over the 0.35% of the former cash rate. The Board’s decision to raise the cash
rate was, again, attributed to the significant higher inflation rate result for the first quarter of this year (2022),
which caused a substantial disparity between the two results. The resilience in Australia’s Economy has also
been evident in the unemployment rate, which is the lowest result in almost 50 years. In this position, Governor
Philip Lowe of the RBA decided to further increase the cash rate. The common outlook amongst economists is
that further increase in cash rate can expected.
The Australian Economy has continually shown signs of recovery as the impact of vaccination rate continues to
increase; therefore, allowing businesses to trade, people to move around and travel as borders between States
begin to open. Bank Bill Swap Rates (BBSW) has shown continued improvements in May 2022, resulting in higher
term deposit rates being offered in the market. Inherent with the increase in term deposit rates being offered
for reinvestments, the original budget estimated return of 0.45%, for 2021/22 Financial Year, has been
favourably surpassed – May 2022 result is detailed in this report. At the time the current year’s budget was
conceptualised, the average term deposit rate (between 1month to 1 year) being offered was 0.24%.
Presently, the average term deposit rate (between 1month to 1 year) being offered is 1.99%.
The 2022/23 Federal Budget delivered strategies that aim to drive resilience in the Australian Economy’s future.
The budget focuses on:
• delivering more jobs and working towards unemployment below 4 per cent,
• investing in stronger defence, borders, and security,
• continuing record investments in health, education, women’s safety, and other essential services,
• delivering cost of living relief for Australians and supporting small businesses; and
• investing in the roads, rail, dams, and renewable energy technology, that will build our future.
Australia’s Long-term government bond yields have remained low, consistent with several countries. Bank
funding costs in Australia have also declined, with money-market spreads having fully reversed the increases
that took place last year. Borrowing rates for both businesses and households have started to rise, consistent
with the RBA cash rate increase outlook, since November 2010. The Australian dollar is at the low end of its
narrow range of recent times.
The inflation rate at the first quarter of 2022 (January 2022-March 2022), being the most recent quarterly result,
has increased to 5.1%, from 3.5% in the previous period - in both headline and underlying terms. The April 2022
unemployment rate is 3.9%, a 0.1% decrease from the previous period. As at writing and completion of this
report, the unemployment rate for May 2022 has not been released.
The Council’s portfolio has continued to outperform the 90 Day Bank Bill Swap Rate (BBSW) benchmark during
reportable month of May 2022. Investments will continue to be monitored closely, to ensure returns are
maximised as opportunities become available.
The investment returns versus the benchmark and annual budget as a percentage for May 2022 are:
Council portfolio current yield (including FRNs) 1.24%
90-day Bank Bill Swap Rate (Benchmark) 0.99%
Enhanced 90-day Bank Bill Swap Rate (Benchmark – BBSW + 20bps) 1.19%
Original budget estimated return (2021/22 Financial Year) 0.45%Penrith City Council
Historical Investment Performance
Table 1
Actual Portfolio Benchmark (BBSW) Enhanced
Benchmark
(BBSW+20bps)
Current Portfolio Yield (including FRNs) 1.24% 0.99% 1.19%
Past 12 Month Portfolio Performance 0.62% 0.16% 0.39%
Portfolio Return for the Period 0.10% 0.08% 0.10%
Portfolio Yield (Actual Versus Benchmark)
The annual weighted average income return on investments, to 31 May 2022, was 0.62%. This graph tracks
performance over time and shows that the yield was between 0.51% and 1.24% for the past year - still above
the BBSW and Enhanced Benchmark, over the same period and economic climate. As at 9 August 2021 Policy
Review Committee, the ‘Enhanced Benchmark’ has been reduced to 20 basis points (bps) from 45bps – post
review of the current market spread offerings.
Graph 1
Investment Portfolio as at 31 May 2022
Monthly Net Return Annualised
1.40%
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22
PCC Monthly Net Return Annualised BBSW Monthly Net Return Annualised
Enhanced BBSW Monthly Net Return Annualised
Annual Portfolio (Actual)
The graph below illustrates the annual trend of the Council’s monthly Investment Portfolio balances.
Graph 1.1
Historical Monthly Balance of Investment Portfolio as at 31 May 2022
$250,000,000
$230,000,000
$210,000,000
$190,000,000
$170,000,000
$150,000,000
$130,000,000
Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22Penrith City Council
Investment Summary by Asset Group and Monthly Movement
Table 1.1
Asset Group Closing Value Closing Value
(Face Value) (Face Value)
30 April 2022 31 May 2022
$ % $ %
Current Cash on Call Group (excl General Fund balance) 14,562,032 7.97% 21,163,581 9.38%
Term Deposit Group 146,000,000 79.91% 178,500,000 79.08%
Floating Rate Notes 16,150,000 8.84% 19,150,000 8.48%
Mortgage Backed Securities* 1,961,530 1.08% 1,950,282 0.86%
Sub-Total 178,673,562 220,763,863
General Fund Bank Balance 4,025,291 2.20% 4,946,623 2.20%
Total 182,698,853 100% 225,710,486 100%
* MBS Purchased in 2006/2007 prior to the current Ministerial Investment Order. This product is being ‘Grandfathered’ – i.e., the Council
will continue to actively manage these investments within the portfolio. However, the Council is not permitted to place further funds in
this bank, due to its credit rating.
May 2022 Investments % Allocation by Asset Groups
The graph below illustrates the dissection of the Council’s Portfolio per investment products or categories.
Graph 1.2
Floating Rate Notes,
8.48%
Mortgage Backed
Securities*, 0.86%
General Fund Bank
Balance, 2.20%
Term Deposit Group,
79.08%
Current Cash on Call
Group (excl bank
balance), 9.38%Penrith City Council
Reconciliation of Invested Funds and Monthly Movement
Table 1.2
Period Ending Period Ending
30 April 2022 31 May 2022
$ $
Represented by:
Externally Restricted Assets
Section 7.11 Developer Contributions 53,884,260 54,712,315
Restricted Contributions for Works 3,922,506 3,523,939
Unexpended Grants* 12,198,137 35,407,669
Other Externally Restricted 40,466,022 40,445,458
Sub-Total 110,470,925 134,089,381
Internally Restricted Assets - Funding of Operations
Internal Reserves 55,389,682 46,090,393
Security Bonds and Deposits 16,829,799 17,830,393
Sub-Total 72,219,481 63,920,786
Restricted Assets Utilised in Operations
Unrestricted Invested Funds 8,448 27,700,319
Total Cash and Investments 182,698,853 225,710,486
*Balance may be in deficit when funds are spent in advance of grant payment date to the Council.
NOTE: The above figures have been prepared under cash basis accounting.
May 2022 Investments % Allocation by Cash Reserve Type
This graph demonstrates the allocation of the Council’s cash reserves.
Graph 1.3
Unrestricted Invested
Funds, 12.27%
Section 7.11 Developer
Contributions, 24.24%
Security Bonds and
Deposits - Payable, 7.90%
Restricted Contributions
for Works, 1.56%
Internal Reserves,
20.42%
Unexpended Grants*,
15.69%
Other Externally
Restricted, 17.92%Penrith City Council
Investment Summary
(Graphed to reflect fund ratings as % of portfolio)
Table 1.3
31 May 2022
Credit Rating Bank/Financial Institution - Utilised Portfolio Policy Maximum
(per Moody’s) $ % %
Short Term
Prime 1 CBA, NAB, Bankwest, Westpac, TCorp 125,610,204 55.65% 100% (40% per institution)
Prime 1 Macquarie Bank 4,000,000 1.77% 100% (40% per institution)
Prime 2 AMP Bank 5,000,000 2.22% 40% (20% per institution)
Prime 1 & 2 134,610,204 59.64%
Long Term
Aa3 Term Deposit - Long Term (CBA,WBC & NAB) 69,000,000 30.57% 100% (40% per institution)
Aa3 Floating Rate Note (WBC) 5,000,000 2.22% 100% (40% per institution)
Aa3 Floating Rate Note (NAB) 2,400,000 1.06% 100% (40% per institution
Aa3 Floating Rate Note (ING) 1,000,000 0.44% 100% (40% per institution
A2 Floating Rate Note (Macquarie Bank) 3,000,000 1.33% 40% (20% per institution)
A2 Term Deposit - Long Term (Macquarie Bank) 1,000,000 0.44% 40% (20% per institution)
A3 Floating Rate Note (Bendigo & Adelaide Bank) 3,000,000 1.33% 20% (10% per institution)
A3 Floating Rate Note (Bank of Queensland) 4,750,000 2.10% 20% (10% per institution)
Baa2 Mortgage Backed Securities 1,950,282 0.87% Grandfathered
(Barclays Capital) *
Total Portfolio 225,710,486 100.00%
*Investments placed prior to current Ministerial Order. This product is being ‘Grandfathered’ – i.e., the Council will continue
to actively manage these investments within the portfolio. However, the Council is not permitted to place further funds in
this bank, due to its credit rating.
May 2022 Investments % Allocation by Moody’s Fund Rating
Reflects Moody’s fund ratings as percentage (%) of the portfolio, to show compliance with the Council’s Investment Policy
objectives of minimising risk.
Graph 1.4
A2, 0.44% A3, 1.33% A3, 2.10% Baa2, 0.87%
A2, 1.33%
Aa3, 0.44%
Aa3, 1.06%
Aa3, 2.22%
Aa3, 30.57% Prime 1, 59.64%Penrith City Council
Diversification of Portfolio
(Graphed to reflect fund ratings as % of portfolio)
Table 1.4
31 May 2022
Dealing Bank Short Term Long Term Investment ($) Allocation (%)
TCorp Prime 1 Aaa 2,496,844 1.11%
Commonwealth Bank of Australia Prime 1 Aa3 71,613,360 31.73%
National Australia Bank Prime 1 Aa3 69,900,000 30.97%
Westpac Banking Corporation Prime 1 Aa3 58,000,000 25.70%
ING Bank (Australia) Prime 1 Aa3 1,000,000 0.44%
Macquarie Bank Prime 1 A2 8,000,000 3.54%
Bendigo and Adelaide Bank Prime 2 A3 3,000,000 1.33%
Bank of Queensland Prime 2 A3 4,750,000 2.10%
Barclays Bank Prime 2 Baa2 1,950,282 0.86%
AMP Bank Prime 2 Baa2 5,000,000 2.22%
Total Investment 225,710,486 100.00%
May 2022 Investment % Allocation by Financial Institutions (per Moody’s Credit Ratings)
Reflects the spread of investments amongst various Financial Institutions to show portfolio diversification in accordance
with the Council’s Policy of risk aversion.
Graph 1.5
Bank of Queensland Barclays Bank AMP Bank
Tcorp
Bendigo and Adelaide 2.10% 0.86% 2.22%
1.11%
Bank
1.33%
Macquarie Bank
3.54%
ING Bank
(Australia)
0.44%
Commonwealth Bank of
Australia
31.73%
Westpac Banking
Corporation
25.70%
National Australia
Bank
30.97%You can also read
