Ordinary Council Meeting - Hastings Council - NSW Government
Ordinary Council Meeting - Hastings Council - NSW Government
Ordinary Council Meeting - Hastings Council - NSW Government
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PORT MACQUARIE-HASTINGS COUNCIL<br />
• Other Issues<br />
'Current value $' in the table above is the estimate of current realisable value for the investment<br />
as provided by Oakvale Capital. It should be noted that this is not necessarily the amount that is<br />
expected to be received from the investment.<br />
All CDO investments are now outside of legislative and policy guidelines which technically<br />
requires remedy. These CDO's are unlikely to make maturity but given there is effectively no<br />
secondary market for these investments the opportunities to exit them are limited.<br />
As reported previously a number of ALN's have been deleveraged meaning no further coupons<br />
will be received. Invested capital for those products has reverted to underlying zero coupon<br />
bonds (low risk instruments with highly rated institutions).<br />
Investment Portfolio Summary (Oakvale Capital Limited)<br />
<strong>Council</strong>’s investment portfolio posted a marked to market return in January of 7.95% p.a. This<br />
was 2.79% p.a. above the bank bill index benchmark return of 5.16% p.a. Outperformance was<br />
driven by the high-yielding term deposits purchased in recent months (all of which are yielding<br />
over 6.20%), as well as a decline in long term swap rates, which assisted the price of the zero<br />
coupon bonds. For the financial year to date ending December, <strong>Council</strong>’s investment portfolio<br />
return has exceeded the bank bill index benchmark by 2.77%pa (7.74%pa vs 4.97%pa). (nb<br />
Oakvale use a different measurement approach to <strong>Council</strong>)<br />
Without marked-to-market influences, <strong>Council</strong>’s investment portfolio currently has an overall<br />
yield of 5.30%pa. This is based on the interest rates due on existing investments and excludes<br />
the underlying changes to the market value of the securities/deposits.<br />
Global issues:<br />
• Political and civilian unrest in Egypt has helped push oil prices to 2 year highs.<br />
• The UK economy is facing the prospect of stagflation as the economy shrank by 0.5% in Q4<br />
2010 and inflation hit 3.7%.<br />
• Portugal managed to issue 10 year debt at below 7% during January, but many experts<br />
anticipate a bail out will be required given Portugal’s lacklustre economy.<br />
• Japan’s credit rating was cut to AA- by Standard and Poor’s on concerns that the country<br />
lacked a ‘coherent strategy’ to tackle its government debt.<br />
Domestic issues:<br />
• The recent floods in Queensland are expected to detract from growth in the early part of<br />
2011. However, rebuilding for homes and infrastructure will provide a boost to growth in late<br />
2011 and early 2012.<br />
• Underlying inflation was lower than expected at 2.25% year on year, the lowest result in a<br />
decade.<br />
Interest rates:<br />
• At its February meeting, the RBA left the cash rate unchanged at 4.75%. Most economists<br />
do not anticipate any rate increases until the 2nd half of 2011.<br />
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