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Wells Fargo presents trust portfolio: $7.33 million, short-duration and CD-heavy holdings
Summary
Wells Fargo Securities presented the Sunnyside Unified District trust portfolio on May 8, reporting a book value of $7,327,000, a book yield of 4.11% and a conservative allocation concentrated in FDIC-insured certificates of deposit and a government money-market fund.
Tyler Tarian, Wells Fargo Securities, reviewed the Sunnyside Unified District trust portfolio at the May 8 trust board meeting, saying the portfolio’s book value is $7,327,000 and the book yield is 4.11%.
Tarian said the trust holds 28 positions: 27 certificates of deposit (CDs) and one government money-market fund. The money-market position is $577,000 and is fully liquid; the broker reported $5,250,000 of securities maturing over the next 12 months and projected interest of about $208,000 over the same period. “What we keep in the money market fund, which is completely liquid, that’s that $577,000 figure,” Tarian said.
Tarian said the portfolio’s market yield at the time of the report was 4.14%, producing an unrealized paper loss of roughly $9,000 if sold immediately. He emphasized the trust’s practice of purchasing investments with the intent to hold them to maturity. “Every investment that we purchase for this portfolio is made with the intention of holding each investment till its defined maturity date,” Tarian said.
The portfolio is short-duration: average maturity and duration “just shy of 1 year,” according to the presentation. Tarian described the CD holdings as laddered up to 24 months; the longest CDs reported were 24-month instruments yielding about 3.64%, which he noted are rate-locked for their term. “So if the Federal Reserve starts to lower rates… it will not affect what we have fixed in each one of these investments that we have laddered out over the next 2 years,” he said.
Tarian also described credit and structural safeguards: the money-market fund invests in U.S. government and agency securities and the CDs are placed in $250,000 increments at individual U.S.-chartered banks to remain within FDIC insurance limits. “That’s how we achieve that $250,000 FDIC insurance on each one of our positions,” he said.
Tarian reviewed scenario analyses including possible CD calls and the portfolio’s sensitivity to 25–50 basis point moves in interest rates, noting the scenarios are theoretical because the trust does not intend to sell holdings before maturity. The presentation materials dated the portfolio snapshot as of April and the analysis was run in early May.
No formal board action was taken during the portfolio presentation; the board moved on to the next agenda item after questions and discussion.
