Fort Walton Beach Ordinance — 1894--Investment Policy-surplus funds — reading text

Consumer Price Index ( CPI) by the United States ( U.S.) Bureau of Labor Statistics ( BLS). Realized Gains ( Losses). The difference between the sale price of an investment and its book value. Gains/ losses are " realized" when the security is actually sold, as compared to " unrealized" gains/ losses which are based on current market value. See " Unrealized Gains ( Losses)." Reference Bills: FHLMC' s short- term debt program created to supplement its existing discount note program by offering issues from one month through one year, auctioned on a weekly or on an alternating four -week basis depending upon maturity) offered in sizeable volumes ($ 1 billion and up) on a cycle of regular, standardized issuance. Globally sponsored and distributed, Reference Bill issues are intended to encourage active trading and market -making and facilitate the development of a term repo market. The program was designed to offer predictable supply, pricing transparency and liquidity, thereby providing alternatives to U. S. Treasury bills. FHLMC' s Reference Bills are unsecured general corporate obligations. This program supplements the corporation' s existing discount note program. Issues under the Reference program constitute the same credit standing as other FHLMC discount notes; they simply add organization and liquidity to the short-term Agency discount note market. Reference Notes: FHLMC' s intermediate -term debt program with issuances of 2, 3, 5, 10 and 30 -year maturities. Initial issuances range from $2 - $ 6 billion with re- openings ranging $ 1 - $ 4 billion. The notes are high- quality bullet structures securities that pay interest semiannually. Issues under the Reference program constitute the same credit standing as other FHLMC notes; they simply add organization and liquidity to the intermediate- and long -term Agency market. Repurchase Agreement ( Repo). A short- term investment vehicle where an investor agrees to buy securities from a counterparty and simultaneously agrees to resell the securities back to the counterparty at an agreed upon time and for an agreed upon price. The difference between the purchase price and the sale price represents interest earned on the agreement. In effect, it represents a collateralized loan to the investor, where the securities are the collateral. Can be DVP, where securities are delivered to the investor' s custodial bank, or " tri- party" where the securities are delivered to a third party intermediary. Any type of security can be used as " collateral," but only some types provide the investor with special bankruptcy protection under the law. Repos should be undertaken only when an appropriate BMA approved master repurchase agreement is in place. Reverse Repurchase Agreement ( Reverse Repo). A repo from the point of view of the original seller of securities. Used by dealers to finance their inventory of securities by essentially borrowing at short- term rates. Can also be used to leverage a portfolio and in this sense, can be considered risky if used improperly. Rolling Returns. The annualized average return for a period ending with the listed year. Rolling returns are useful for examining the behavior of returns for holding periods similar to those actually experienced by investors. Safekeeping. Service offered for a fee, usually by financial institutions, for the holding of securities and other valuables. Safekeeping is a component of custody services. Secondary Market. Markets for the purchase and sale of any previously issued financial instrument. Securities Lending. An arrangement between and investor and a custody bank that allows the custody bank to loan" the investors investment holdings, reinvest the proceeds in permitted investments, and shares any profits Ordinance 1875, Adopted January 8, 2013 Page 22 of 25  City of Fort Walton Beach, FL INVESTMENT POLICY with the investor. Should be governed by a securities lending agreement. Can increase the risk of a portfolio in that the investor takes on the default risk on the reinvestment at the discretion of the custodian. Sinking Fund. A separate accumulation of cash or investments ( including earnings on investments) in a fund in accordance with the terms of a trust agreement or indenture, funded by periodic deposits by the issuer ( or other entity responsible for debt service), for the purpose of assuring timely availability of moneys for payment of debt service. Usually used in connection with term bonds. Spread. The difference between the price of a security and similar maturity U. S. Treasury investments, expressed in percentage terms or basis points. A spread can also be the absolute difference in yield between two securities. The securities can be in different markets or within the same securities market between different credits, sectors, or other relevant factors. Standard & Poor' s. One of several NRSROs that provide credit ratings on corporate and municipal debt issues. STRIPS ( Separate Trading of Registered Interest and Principal of Securities). Acronym applied to U. S. Treasury securities that have had their coupons and principal repayments separated into individual zero -coupon Treasury securities. The same technique and " strips" description can be applied to non -Treasury securities ( e. g. FNMA strips). Structured Notes. Notes that have imbedded into their structure options such as step -up coupons or derivative - based returns. Standard Deviation. In finance, standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility. Standard deviation is also known as historical volatility and is used by investors as a gauge for the amount of expected volatility. Swap. Trading one asset for another. TAP Notes: Federal Agency notes issued under the FHLB TAP program. Launched in 6/ 99 as a refinement to the FHLB bullet bond auction process. In a break from the FHLB' s traditional practice of bringing numerous small issues to market with similar maturities, the TAP Issue Program uses the four most common maturities and reopens them up regularly through a competitive auction. These maturities ( 2, 33 5 and 10 year) will remain open for the calendar quarter, after which they will be closed and a new series of TAP issues will be opened to replace them. This reduces the number of separate bullet bonds issued, but generates enhanced awareness and liquidity in the marketplace through increased issue size and secondary market volume. Tennessee Valley Authority ( TVA). One of the large Federal Agencies. A wholly owned corporation of the United States government that was established in 1933 to develop the resources of the Tennessee Valley region in order to strengthen the regional and national economy and the national defense. Power operations are separated from non -power operations. TVA securities represent obligations of TVA, payable solely from TVA's net power proceeds, and are neither obligations of nor guaranteed by the United States. TVA is currently authorized to issue debt up to $ 30 billion. Under this authorization, TVA may also obtain advances from the U. S. Treasury of up to 150 million. Frequent issuer of discount notes, agency notes and callable agency securities. Total Return. Investment performance measured over a period of time that includes coupon interest, interest on interest, and both realized. and unrealized gains or losses. Total return includes, therefore, any market value appreciation/ depreciation on investments held at period end. Trailing. The most recent time period, often used to describe the time that a particular set of data is referring to. Trailing is used to describe a past statistic, such as same -store sales, but can also be used to describe a technique, such as a trailing stop order. Most often you will hear the term " trailing 12 months," " trailing three months" or trailing six months." Treasuries. Collective term used to describe debt instruments backed by the U. S. Government and issued through the U. S. Department of the Treasury. Includes Treasury bills, Treasury notes, and Treasury bonds. Also Ordinance 1875, Adopted January 8, 2013 Page 23 of 25  City of Fort Walton Beach, FL INVESTMENT POLICY a benchmark term used as a basis by which the yields of non -Treasury securities are compared ( e. g., " trading at 50 basis points over Treasuries "). Treasury Bills ( T- Bills). Short- term direct obligations of the United States Government issued with an original term of one year or less. Treasury bills are sold at a discount from face value and do not pay interest before maturity. The difference between the purchase price of the bill and the maturity value is the interest earned on the bill. Currently, the U. S. Treasury issues 4 -week, 13 -week and 26 -week T -Bills Treasury Bonds. Long -term interest -bearing debt securities backed by the U. S. Government and issued with maturities of ten years and longer by the U. S. Department of the Treasury. The Treasury stopped issuing Treasury Bonds in August 2001. Treasury Notes. Intermediate interest -bearing debt securities backed by the U. S. Government and issued with maturities ranging from one to ten years by the U. S. Department of the Treasury. The Treasury currently issues 2 -year, 5 -year and 10 -year Treasury Notes. Trustee. A bank designated by an issuer of securities as the custodian of funds and official representative of bondholders. Trustees are appointed to insure compliance with the bond documents and to represent bondholders in enforcing their contract with the issuer. Uniform Net Capital Rule. SEC regulation 15C3 -1 that outlines the minimum net capital ratio ( ratio of indebtedness to net liquid capital) of member firms and non -member broker /dealers. Unrealized Gains ( Losses). The difference between the market value of an investment and its book value. Gains/ losses are " realized" when the security is actually sold, as compared to " unrealized" gains /losses which are based on current market value. See also " Realized Gains ( Losses)." Variable -Rate Security. A bond that bears interest at a rate that varies over time based on a specified schedule of adjustment ( e. g., daily, weekly, monthly, semi -annually or annually). See also " Floating Rate Note." Weighted Average Maturity ( or just " Average Maturity"). The average maturity of all securities and investments of a portfolio, determined by multiplying the par or principal value of each security or investment by its maturity ( days or years), summing the products, and dividing the sum by the total principal value of the portfolio. A simple measure of risk of a fixed- income portfolio. Weighted Average Maturity .to Call. The average maturity of all securities and investments of a portfolio, adjusted to substitute the first call date per security for maturity date for those securities with call provisions. Yield Curve. A graphic depiction of yields on like securities in relation to remaining maturities spread over a time line. The traditional yield curve depicts yields on U. S. Treasuries, although yield curves exist for Federal Agencies and various credit quality corporates as well. Yield curves can be positively sloped ( normal) where longer -term investments have higher yields, or " inverted" ( uncommon) where longer -term investments have lower yields than shorter ones. Yield to Call (