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Chief Financial Officer's (CFO) Report to the Board

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II. Investments Results - First Quarter 2011

DIF Investment Portfolio

  • The total liquidity (total market value including accrued interest) of all DIF-related investment portfolios stood at $45.5 billion on March 31, 2011, down from $46.2 billion on December 31, 2010, led by the decline in the DIF investment portfolio as discussed below.
  • The DIF investment portfolio’s total market value decreased by $1.0 billion during the first quarter of 2011, and totaled $38.5 billion on March 31, 2011.  The decrease was primarily the result of funding 26 bank failures during the first quarter of 2011.  Moreover, during the first quarter of 2011, the DIF received $3.3 billion in dividends and other payments from its receiverships, thus mitigating the DIF portfolio’s decline. 
  • On March 31, 2011, the DIF investment portfolio’s yield was 0.28 percent, down 12 basis points from its December 31, 2010, yield of 0.40 percent.  A primary factor in this decline was that $1.4 billion in relatively high-yielding Treasury Inflation-Protected Securities with a weighted average yield of 4.17 percent matured during the period.  The DIF investment portfolio’s total return for the first quarter of 2011 was about 0.10 percent, 11 basis points higher than the -0.01 percent total return of its benchmark, the Merrill Lynch 1-10 Year Treasury Index (Index).  Given that most longer-maturity Treasury yields increased (that is, Treasury security prices fell) over the first quarter, the DIF portfolio’s large balances of comparatively low yielding overnight investments did not experience a price decline, hence the outperformance compared to the Index (the Index has longer-duration conventional Treasury securities).
  • In accordance with the approved first quarter 2011 investment strategy, staff purchased a total of seven short-maturity Treasury securities on two occasions during the first quarter of 2011.  The seven securities had a total par value of $8.1 billion, a weighted average yield-to-maturity of 0.68 percent, and a weighted average maturity (WAM) of 1.68 years.

Other Corporate Investment Portfolios

  • On March 31, 2011, the Debt Guarantee Program (DGP) investment portfolio stood at $7.0 billion (total market value), up about 5 percent from its December 31, 2010 balance of $6.6 billion.  This increase was principally due to the net transfer of a little over $300 million from the DIF portfolio to the DGP portfolio, reversing payments made by the DGP to the DIF for TAG claims.  At quarter end, the DGP portfolio had a yield to maturity of 0.20 percent and a WAM of 0.38 years.  In accordance with the approved first quarter 2011 investment strategy for the DGP portfolio, staff purchased four short-maturity Treasury securities during the first quarter of 2011.  The securities had a total par value of $1.2 billion, a weighted average yield-to-maturity of 0.75 percent, and a WAM of 1.79 years.

 




Last Updated 06/09/2010 dofbusinesscenter@fdic.gov

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