MEDINA, Ohio -- Medina County Treasurer John Burke had some good news for members of the Medina County Investment Advisory Board at its most recent meeting.
Burke reported that interest earnings for the county are up 20 percent year-to-date from the same time in 2018. Total income from portfolio investments through May 2019 was $1,076,642, which is $181,986 higher than last year through May, Burke said.
This extra revenue goes into the county’s general fund to be used by the county commissioners. Burke confirmed that the portfolio should make more this year than the original estimate of $2,300,000.
Burke is chairman of the County Investment Advisory Board, which meets quarterly to review the investment portfolio he manages. The other members of the board include the three Medina County commissioners and the Medina clerk of courts.
Strategy change
In a July 2 press release, Burke said that with market interest rates rising steadily over the last year, the market changed drastically in the second quarter of this year. The U.S. economy has slowed, Burke said, and the Federal Reserve has hinted that it might decrease interest rates to maintain economic expansion. In anticipation of this, the financial markets have already decreased interest rates.
In the press release, Burke provided the following example on current interest rates for Treasury Bills:
“The yield curve for two-year and 10-year U.S. Treasuries has flattened, causing the comparative interest rates to become very close, currently with only about a 20-basis point spread. When this yield curve inverts, there is usually a recession,” Burke explained. “The last time this happened was in 2005, just before the last recession.”
As a result, Burke said in the release, his investment portfolio strategy has been changed from purchasing short-term investments to acquiring longer-term investments with the highest yields possible, before those rates drop too much. He added that bullets and calls will be purchased to get higher-yielding short-term rates.
The current county portfolio has $107 million invested in about 90 different investments, the release noted. The portfolio’s current yield is 2.2 percent, with an average maturity of two years.
The press release goes on to say that the Ohio Revised Code requires county treasurers to invest in fixed-income, interest-bearing investments such as U.S. Treasuries, certificates of deposit, government agencies such as Federal Home Loan Mortgages, money markets, commercial paper, and municipal and corporate bonds. They cannot invest in equities or stocks.
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