Portfolio healthy, report says

19:23, Feb 10 2014

Mackenzie's investment portfolio is looking healthier than the average, according to a quarterly report.

The Bancorp Treasury Services report for the quarter to December shows the council's portfolio has increased in value by 0.89 per cent compared to the benchmark portfolio figure of 0.49 per cent over the same period.

Paul Morris, Mackenzie finance and administration manager, said the portfolio stood at $3.28 million.

The weight average running yield of council's bond portfolio was 6.18 per cent at the end of December with $6m reinvested in term deposits.

Mr Morris said the credit spread for a number of bonds in the portfolio declined abnormally compared to the decline in credit spreads in the benchmark portfolio.

"This is despite council's portfolio having a longer duration [2.7 years compared to 2.49], and despite interest rates rising over the quarter."


The report stated Mackenzie District Council had avoided capital losses that would have resulted from investing in bonds during a time of rising interest rates.

Term deposits continued to provide higher yields than bonds of a similar term.

The report showed a table of bond rates that indicated the council would have to invest in terms of around 1.25 to 1.5 years to achieve similar yields.

"With interest rates more likely to rise than fall over the next year or so, it was decided to access the term deposit market for shorter dated investments.

"Overall Bancorp Treasury is satisfied with the makeup and profile of MDC's portfolio.

"The running yield of Long Terms Fund Portfolio [LTFP], at 6.18 per cent, still delivers considerable benefits over the interest rates available for shorter term money market investments, which themselves are trading at ‘elevated' levels compared to deposit rates available in the wholesale market."

The Timaru Herald