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

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II. Investments Results - Third Quarter 2011

DIF Investment Portfolio

  • The total liquidity (total market value including accrued interest) of all DIF-related investment portfolios stood at $42.9 billion on September 30, 2011, down from $46.2 billion on December 31, 2010, led by the decline in the DIF investment portfolio as discussed below.

Total DIF - Related Investment Portfolio Liquidity (End-of-Quarter)

Total DIF - Related Investment Portfolio Liquidity End-of-Quarter ($ in billions)
  Quarter
Total DIF - Related Investment Portfolio Liquidity
4th Qtr 2007 $53.1
1st Qtr 2008
$55.1
2nd Qtr 2008
$53.2
3rd Qtr 2008
$33.9
4th Qtr 2008
$31.7
1st Qtr 2009 $33.0
2nd Qtr 2009 $29.7
3rd Qtr 2009 $23.4
4th Qtr 2009 $66.1
1st Qtr 2010 $63.3
2nd Qtr 2010 $44.0
3rd Qtr 2010 $43.7
4th Qtr 2010 $46.2
1st Qtr 2011 $45.5
2nd Qtr 2011 $45.0
3rd Qtr 2011 $43.0
  • The DIF investment portfolio’s total market value decreased by $4.0 billion during the first nine months of 2011, and totaled $35.6 billion on September 30, 2011.  The decrease was primarily the result of having to fund 74 bank failures during the first nine months of 2011.  However, it should be noted that 48 of these failures were resolved as cash-conserving shared-loss transactions, requiring substantially lower initial resolution payments, thus helping to mitigate the decline in the DIF portfolio’s balance.  Moreover, during the first nine months of 2011, the DIF received $7.4 billion in dividends and other payments from its receiverships, thus mitigating the DIF portfolio’s decline. 
  • On September 30, 2011, the DIF investment portfolio’s yield was 0.38 percent, down 2 basis points from its December 31, 2011, yield of 0.40 percent.  The DIF investment portfolio’s total return for the year-to-date period was 29 basis points, about 569 basis points less than the 5.97 percent total return of its benchmark, the Merrill Lynch 1–10 Year Treasury Index (Index).  Given that most longer-maturity Treasury yields decreased (that is, Treasury security prices rose) during the first nine months of the year, the DIF portfolio’s large balances of comparatively low yielding overnight investments and short-term Treasury bills and notes could not keep pace with the rise in Treasury prices, hence the underperformance compared to the Index (on average, the Index has longer-duration conventional Treasury securities).

Other Corporate Investment Portfolios

  • On September 30, 2011, the Debt Guarantee Program (DGP) investment portfolio stood at about $7.4 billion (total market value), up from its December 31, 2010, balance of $6.6 billion.  This increase was principally due to the net transfer of just over $700 million from the DIF portfolio to the DGP portfolio (year-to-date), reversing payments made by the DGP to the DIF for Transaction Account Guarantee Program claims.  At quarter end, the DGP portfolio had a yield to maturity of 0.21 percent and a weighted average maturity (WAM) of 0.37 years.  In accordance with the approved third quarter 2011 investment strategy for the DGP portfolio, staff purchased two short-maturity Treasury securities during the third quarter of 2011.  The securities had a total par value of $600 million, a weighted average yield of 0.20 percent, and a WAM of 0.75 years.

 




Last Updated 12/05/2011 dofbusinesscenter@fdic.gov

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