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Ventura County Board of Supervisors <br />June 12, 2001 <br />Page Two <br />consumption and the risk of slower growth abroad, continues to weigh on the <br />economy. <br />The Fed also continued to maintain a bias toward weakness, suggesting that they still perceive <br />risks to potential future growth. Some detail is provided in the "Beige Book," the economic <br />review of the nation provided to the members of the FOMC prior to their meeting. In it, the <br />following observations were made: <br />• Almost all districts reported a slow pace of economic activity. <br />• Retail sales were weak in March but strengthened in April. <br />• Industrial activity has continued to weaken. <br />• Labor market tightness has eased and upward wage pressure has abated, but has been <br />replaced with sharply rising energy costs. <br />• Home sales and new construction have remained steady or improved. <br />The reaction of the debt markets was to increase the yield spread between short-term rates and <br />long-term rates. The short-term markets followed the lead of the Fed and declined in yield by <br />about 30 basis points. Longer-term rates, however, rose 1 to 9 basis points as the markets are <br />beginning to look beyond the immediate economic slowdown and assess the prospects for <br />growth brought on by the five successive rate declines by the Fed. <br />Given the current interest rate environment, we anticipate the County's yield to decrease slightly. <br />Further, we continue to seek investment opportunities in order to optimize earnings (U.S. <br />Treasury Market graph attached). <br />Attached is a listing of market values for all investments for the month ending May 31, 2001. <br />GASB Statement No. 31 states that variances between the cost of investments and the fair value <br />of investments shall not be considered budgetary resources or uses of resources unless the value <br />of investments is permanently impaired because of decreased issuer creditworthiness or it is <br />determined that the Treasurer will be unable to hold investments to maturity. <br />The following is a list of attached graphs: <br />• Portfolio Average Monthly Balance <br />+ Average Portfolio Maturity <br />+ Balance Yield Comparison by Month <br />• Portfolio Holdings by Instrument Type <br />+ Yield Curve; U.S. Treasury Market <br />• Maturity Distribution <br />