August Investment Performance Report from the Office of the State Treasurer
To the People of Oklahoma:
The Office of the State Treasurer is pleased to issue the monthly investment performance report. This report is an important part of my office’s commitment to disclose our economic environment and portfolio results.
Portfolio Performance, Diversification, and Strategy
In August, our portfolio yielded a return of 2.71% with a weighted average maturity of 2.75 years. Our total assets equaled $15.3 billion, a $2 billion increase compared to August 2022.
Within our portfolio, U.S. government agencies accounted for 13% and mortgage-backed securities made up 18%. The majority of our assets, 61%, were invested in U.S. treasuries, while 7% were in money market mutual funds and 0.5% in certificates of deposit. State and foreign bonds accounted for the remaining balance of funds invested.
Market Conditions for August
The benchmark 10-year treasury closed the month at 4.11%, the 2-year at 4.86%, and the 30-year at 4.21%. According to Dow Jones Newswire, positive economic data has led investors to believe that the Federal Reserve will keep rates higher for longer to control inflation, resulting in higher yields on longer-term government debt.
In terms of market performance, the S&P 500 and NASDAQ Composite snapped five-month winning streaks, while the Dow Jones Industrial Average posted its first monthly loss since May. The S&P 500 and Dow declined by 1.7% and 2.3% respectively, while the NASDAQ dropped by 2.1%.
Federal Reserve Meeting Minutes
The minutes from the July Federal Reserve meeting revealed that officials were still concerned about inflation, leading to a 0.25% interest rate hike. CNBC reported that almost all meeting participants were in favor of the rate increase, while those opposed suggested observing the impact of previous increases on economic conditions.
Economic Developments for August
The nonfarm jobs for July were upwardly revised by over 14% to 371,000 from the previously reported number. However, the number of jobs created in August fell below expectations, totaling 177,000. Reuters noted that there were 1.51 job openings for every unemployed person in July, the lowest ratio since September 2021.
Inflation and Consumer Price Index
The Consumer Price Index for All Urban Consumers increased by 0.6% in August, following a 0.2% increase the previous month. Over the last 12 months, the all-items index rose 3.7%. Reuters reported that half of the index increase was attributed to the cost of gas, while shelter costs rose for the 40th consecutive month. The Producer Price Index rose 0.3% and 0.8% on a year-over-year basis.
Retail Sales and Existing Home Sales
Retail sales beat expectations in July, increasing by 0.7% month-over-month. The sales number for the previous month was also upwardly revised by 0.1%. Trading Economics noted that sales likely received a boost from Amazon’s Prime Day, with non-store retailers and sporting goods seeing the biggest increases.
Existing home sales, however, dropped to the lowest level since January, with a seasonally adjusted annualized rate of 4.07 million in July, compared to 4.16 million in June. Limited inventory and mortgage rates were cited as key factors affecting existing home sales.
Gross Domestic Product (GDP)
The second estimate of gross domestic product (GDP) for the second quarter of 2023 was revised downwards to a 2.1% annualized rate from the previously reported 2.4%. Reuters reported that downward revisions to inventory investment, business spending, and intellectual products offset a slight upgrade to consumer spending.
Collateralization, Payments, and Fees
All funds requiring collateralization under our control were secured at rates ranging from 100% to 110%, depending on the type of investment. Securities were purchased or sold using competitive bidding. Bank fees and money market mutual fund operating expenses are detailed separately, as is the earnings split between the State Treasurer and the master custodian bank on securities lending income.
Total Funds Invested
Funds available for investment at market value include the State Treasurer’s investments, totaling $11,878,146,452, as well as State Agency balances in OK Invest, amounting to $3,506,396,841. In total, we have $15,384,543,293 invested.
This report provides an overview of the economic conditions impacting our investments and the performance of our portfolio in August. We remain committed to transparency and accountability in managing the state’s funds and will continue to provide these monthly reports.
The Office of the State Treasurer.