REPORTS May - West Virginia Legislature

WEST VIRGINIA BOARD oF TREASURY IIIVESTMENTSTHE EcoNoMIC STATEMnncu 2009Market Rebound Sparks EncouragementTh€ financlal narkets rebounded in March ss investors' pent-up optimism lvas modestly rewarded with someencouragement on ihe economic front. The rebound hns mmy s?€culating that the economy has now bottomed out andthe worst is now b€hind us Th€r€ remains another group who believe \r€ have yet to see th€ botiom.On lhe plus side:. The G-20 m€€tmg pledged $l tsillion inenergency aid to prevent a firther financialdecline. Mark-to.mark€t accounting rules are beiog. The new Sl tnllion Public-Private lnv6uNorpmgraIn could nd bank of toxic ass€ts.. New home sales rcse by 4.?% in F€bnary-. Durable goods orders ros€ in February by3.4% reversing six stmight months of d€€lin€.. CorEunr€r confidence rose ro 20 in lvlarch, asmall uptick fiom lhe 25.3 level in February.On th€ negative side:. Banks are exp€cted to sustain Sl irillion ofadditional writ€-do\lns-. The S I trillion TALF rs experiencing invesror. l7 ofthe c-20 members have impleme ed 47trew trade restrictions. The U.S. unemploym€nt rate rose to 8.5% viththe loss ofan additional 663,000 jobs in April.Five Stale Banhs Toke Hone S5 Million EochFiv€ West virginia banlc each took honre $5 millionwith successfirl interest mte bids during the Westvirgiua Board of Treaury Investmenrs lS-oolin€cenificat€ ofdeposit auction in Apdl.Freedom Bank ofBelingron, wesbanco, United, MainStreet ofwhe€lng, and Fifth Third ofHuntin8lon eachsuccesstully bid on 55 million in April.BB&T is the leader in th€ bidding action, with $83million captur€d sinc€ the first auction in May 2006.wesbanco is second at 561 million, and Uniled is third at546.5 millbn. Fr€edom Bank ofBelington, a muchsmeller instirution, is founh \{1th cumulative winnings of54l million.In all. the auctions hav€ eamed the state 5l.t millionnore than ifit had simply purchased Treasury billswithout competition The BTI has placed a total of$454Inillion on deposit since the auctions began.. Honl€ prices h 20 U.S cities fell 19% in February fiorn a ycar €arlier, marking the fastest drop on record,whlle foreclosues surged 29 9% in February.Whil€ a cas€ can be made either *ry rcgardng where we actually are in thts r€cession, one thing re'nans painfrlly clear:The deleriomtingjob narkel is likely to dampen consum€r coflfidenc€. Addirionally, higher raxes and banks'rclucranceto lend should hinder business's need to create jobs in the near tuture and keep the economy do*rl.Rates across the yield curve fell in response to lhe Federal Reserve's announcement of iti decision lo purch$e $300billion oflong€r rerm Tr€asury ecurities The 2-year yield clos€d down l? basis poinls whil€ the yield onthe lo-yearTr€asury not€ fell0.36% to 2.66%, and the lo-year bond ended the rnnth down 0.18% to clos€ out at 3.53%. Bymonth-€nd, spreads on rhe fiont end ofthe cllrve (2-10 year) had narowed by 19 basis poinb ro 186 basis points whilethe back end ofthe curve (10-30 year) steep€ned by lE basis poinrs to 87 basis points, and the Fed Funds Rate continuedto fluctuate in the 0.00% - 0.25% range.The Barclays Capilal U S. Aggegate Index rctumed |.39% during $e nonth whil€ rnost spread sectoE outperfornedtheir same duralion Treasunes. CMBS issues rebounded shaQly in March in response to an expanded veFion of theTALF. Credit und€rperforned th€ overall nwket during th€ month, wi$ the Financ€ and lnsurEnce induslies faring rheworst. The Citigoup 90-Day T-Bill Index r€hrmed 0.02% in March trailing the 0.49% retum ofthe Citigroup l-3 Ye6rGovemnent / Coryorale Index. For the tra ing 12 monrh p€riod, the 90-Day T-Bills fetumed I 13% while ihe l-3 YearGovernment / CorDorare Index r€tum€d 2 85%.