HomeMy WebLinkAboutStaff Report 2512-5678CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Monday, May 18, 2026
Council Chambers & Hybrid
5:30 PM
Agenda Item
A.Investment Activity Report for the Third Quarter (January – March), Fiscal Year 2026.
CEQA Status – Not a Project.
City Council
Staff Report
From: City Manager
Report Type: INFORMATION REPORTS
Lead Department: Administrative Services
Meeting Date: May 18, 2026
Report #:2512-5678
TITLE
Investment Activity Report for the Third Quarter (January – March), Fiscal Year 2026.
CEQA Status – Not a Project.
RECOMMENDATION
This is an informational report and no City Council action is required.
EXECUTIVE SUMMARY
This report is presented in accordance with California Government Code Section 53646 and the
City’s Investment Policy.
As of March 31, 2026, the consolidated cash and investment holdings totaled $671.4 million
(market value), including $526.4 million in investments and $145.0 million in liquid accounts.
The investment portfolio was in full compliance with the City’s Investment Policy, and staff
projects adequate liquidity to meet expenditure requirements for the next six months.
Attachments and links in this report provide detailed cash and investment information,
including portfolio holdings, performance metrics, and related financial summaries.
BACKGROUND
The City’s Investment Policy is reviewed and approved annually by Council and establishes the
framework for managing public funds in accordance with the Prudent Investor Standard under
state law. The policy outlines authorized investment types, maturity and credit quality limits,
diversification requirements, and reporting standards to ensure the objectives of safety,
liquidity, and return.
The policy also requires the Administrative Services Department to provide the City Council
with monthly and quarterly investment reports, consistent with California Government Code
53646. Monthly reports provide details on investment activity during the period, such as
purchases, calls, redemptions, and maturities. This quarterly report summarizes the City’s
investment holdings, portfolio performance, and compliance with the City’s Investment Policy
and California Government Code.
ANALYSIS
Graph 1 below illustrates the City’s portfolio by security type, reflecting how funds are
allocated across permitted investment categories.
Table 1 summarizes the portfolio’s maturity structure, which supports the City’s liquidity
objectives and duration strategy.
Investment Performance and Activity
For the quarter ended March 31, 2026, the City’s portfolio average market yield was 4.06%
compared to 3.84% for the ICE BofA 1-5 Year U.S. Treasury & Agency Index benchmark. The
portfolio's total return for the quarter was 0.46%, exceeding the benchmark return of 0.20%.
During the quarter, approximately $72.5 million in securities were purchased, $5.5 million were
called or redeemed, $58.8 million matured, and $1.9 million were sold.
Table 2 summarizes key portfolio characteristics including maturity, duration, yield, and credit
quality. As of March 31, the yield for LAIF and the two-year US Treasury were 3.82% and 3.79%,
respectively. While these are not direct performance benchmarks, they provide useful context
for evaluating the portfolio’s positioning relative to short-term liquidity returns and broader
market conditions.
Table 2: Portfolio Characteristics
Benchmark*
Portfolio as of
March 31
Portfolio as of
Dec 31
Average Maturity (yrs)2.65 2.99 2.97
Average Modified Duration 2.47 2.63 2.56
Average Purchase Yield 3.04%2.76%
Average Market Yield 3.84%4.06%3.87%
Average Credit Quality**AA+AA+AA+
*Benchmark: ICE BofA 1-5 Unsubordinated US Treasury & Agency Index
**The credit quality is a weighted average calculation of the highest S&P, Moody’s and Finch
Compliance and Credit Standards
The City’s Investment Policy defines general portfolio limits and controls, including a maximum
stated maturity of 10 years, no more than 30% of the market value of the total portfolio in
maturities beyond five years, and maintaining a market value above 95% of book value. All
marketable securities are held by a third-party custodian, and valuations are independently
verified.
Economic Outlook
Inflation remained elevated in early 2026, with recent increases largely driven by higher energy
prices. While underlying inflation has shown some signs of stabilizing, overall price levels
remain above the Federal Reserve’s target. The Iran conflict contributed to this trend by
disrupting global oil supply, leading to higher fuel costs and adding pressure to inflation.
Cash Flow Outlook
Cash flow needs fluctuate over the course of the fiscal year as a result of cyclical revenue
patterns, with larger inflows from major revenue sources such as property tax receipts
occurring in the second half of the year. One-time activities, such as the annual prepayment of
pension obligations and large capital expenditures, also influence these patterns. The City‘s
investment strategy aligns with these cycles by timing maturities and maintaining sufficient
liquidity to meet ongoing needs as they occur.
Funds Held by Fiscal Agents and Trustees
The City holds bond proceeds, reserves, and debt service funds with fiscal agents, which are
invested in accordance with the respective bond indentures. The City also maintains a Section
115 Pension Trust with Public Agency Retirement Services (PARS) and Retiree Medical Funds
(Other Post-Employment Benefits Trust or OPEB), governed by the City’s Retiree Benefit
Funding Policy.
FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
Book Value Market Value
536,991,494$ 526,367,008$
Other Liquid Accounts
Cash with Wells Fargo Bank 2,424,209 2,424,209
Cash with US Bank & Receivables 31,375,479 31,375,479
Fidelity Money Market Funds 58,703,584 58,703,584
Local Agency Investment Fund (LAIF)52,521,162 52,521,162
Total - Other Liquid Accounts 145,024,434 145,024,434
CONSOLIDATED PORTFOLIO TOTAL (Attachment B)682,015,928 671,391,442
Other Debt Service Funds*
US Bank Trust Services **
2009 Water Revenue Bonds (Build America Bonds)
Debt Service and Reserve Funds 2,102,850 2,102,850
2011 Utility Revenue Refunding Bonds
Debt Service and Reserve Funds 588,004 588,004
2018 Capital Improvement (Golf Course & 2002B COP Refinance)
(Taxable- Green Bond) Certificates of Participation
Debt Service Funds 708 708
2019 California Avenue Parking Garage Certificates of Participation
(Tax-Exempt and Taxable Bonds)
Debt Service and Reserve Funds 2,984 2,984
2021 Public Safety Building Certificates of Participation
Debt Service Funds 5,173 5,173
2022A & B General Obligation (Library) Bond
Cost of Issuance Funds 4,344 4,344
California Asset Management Program (CAMP) ***
2012 University Ave. Parking Refunding Bonds
Reserve Fund 3,223,929 3,223,929
Public Agencies Post-Employment Benefits Trust ****
Public Agency Retirement Services (PARS)127,447,717 127,447,717
Total Other Funds 133,375,708 133,375,708
GRAND TOTAL 815,391,636$ 804,767,150$
* These funds are subject to the requirements of the underlying debt indenture.
** U.S. Bank investments are in money market mutual funds that exclusively invest in U.S. Treasury securities.
*** CAMP investments are in money market mutual fund which invest in bankers acceptance, certificate of deposit,
commercial paper, federal agency securities, and repurchase agreements.
**** PARS investments are in moderately conservative index plus funds
INVESTMENT REPORT
City of Palo Alto | As of March 31, 2026
CHANDLER ASSET MANAGEMENT | chandlerasset.com
Chandler Team:
For questions about your account, please call (800) 317-4747,
or contact clientservice@chandlerasset.com
Information contained herein is confidential. We urge you to compare this statement to the one you receive from your qualified custodian. Please see Important Disclosures at the end of the statement.
ATTACHMENT B
TABLE OF CONTENTS
ECONOMIC UPDATE
ACCOUNT PROFILE
CONSOLIDATED INFORMATION
1
ATTACHMENT B
ECONOMIC UPDATE
2
ATTACHMENT B
March payrolls rebounded by 178,000 after February’s revised 133,000 decline, but the war in Iran and its disruption of the Strait of Hormuz
have pushed crude oil above $112,injecting a potential inflationary shock into an economy contending with sticky core prices above 3%.
The Federal Reserve has held the funds rate at 3.50–3.75%and is signaling a cautionary stance, keeping open the option of delaying cuts if
oil
‑
related inflation proves persistent rather than transitory.As the data flow normalizes,the Chandler team anticipates additional yield
curve steepening as the Federal Reserve gradually guides the policy rate toward a more neutral range.The Federal Reserve’s March dot
plot still projects one cut this year, yet the Iran-driven energy shock has narrowed the path toward easing.
The Federal Reserve’s March 2026 FOMC meeting ended with policymakers again holding the target range at 3.50%–3.75%,as the
Committee maintained its pause following three late 2025 rate cuts.Governor Stephen Miran dissented in favor of an additional
quarter
‑
point reduction,while Christopher Waller joined the majority,tipping the vote 11–1 to leave the benchmark rate unchanged.
Meanwhile,President Trump’s nomination of Kevin Warsh to succeed Jerome Powell as chair has hit a roadblock after a Republican senator
vowed to block Warsh’s confirmation amid the Justice Department’s ongoing probe of the central bank.
Treasury yields exhibited considerable first-quarter volatility as the Iran conflict injected energy-driven inflation fears into a market
grappling with sticky core prices.At March month-end, the 2-year yield stood at 3.79%,up 32 basis points year-to-date,the 10-year at
4.32%,and the 30-year at 4.86%.The 2-year to 10-year spread narrowed to 52 basis points,reflecting pronounced flattening as short rates
rose faster than longer maturities.One year ago,that spread stood near 32 basis points, providing context on normalization since the 2022
through 2024 yield curve inversion. The 3-month to 10-year spread was approximately 64 basis points at March month-end.
ECONOMIC UPDATE
3
ATTACHMENT B
-400
-200
0
200
400
600
800
1,000
MO
M
C
h
a
n
g
e
I
n
T
h
o
u
s
a
n
d
s
(
0
0
0
'
s
)
Nonfarm Payroll (000's)
Non-farm Payroll (000's)
3-month average (000's)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Unemployment Rate
Underemployment Rate (U6)
Unemployment Rate (U3)
Ra
t
e
(
%
)
March nonfarm payrolls rose by 178,000,a decisive reversal from February’s revised 133,000 decline that had been distorted by a Kaiser
Permanente strike affecting over 30,000 healthcare workers and severe winter weather.Healthcare contributed 76,000 positions as
striking nurses returned,while construction and leisure rebounded from weather-induced troughs. The unemployment rate edged lower to
4.3%,though partly from a labor force reduction rather than a hiring acceleration. Meanwhile,the underemployment rate edged up to
8.0%from 7.9%in February. Average hourly earnings rose 0.2%over the month and 3.5%year over year—the slowest annual pace since
May 2021.
Source: US Department of Labor Source: US Department of Labor
EMPLOYMENT
4
ATTACHMENT B
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Job Openings
Recession
Historical Average
In
T
h
o
u
s
a
n
d
s
(
0
0
0
'
s
)
Job openings fell to 6.9 million in February from a revised 7.2 million in January, according to the Bureau of Labor Statistics’Job Openings
and Labor Turnover Survey.The ratio of openings to unemployed workers slipped to 0.9,reinforcing the gradual rebalancing of demand
and supply.Hires decreased to 4.8 million,the lowest since April 2020,suggesting employers have grown selective about adding
headcount. Quits were little changed at 3 million.The data reflects a labor market consistent with the Federal Reserve’s characterization
of a no-hire, no-fire environment.
Source: US Department of Labor
JOB OPENINGS & LABOR TURNOVER SURVEY
5
ATTACHMENT B
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Consumer Price Index (CPI)
CPI YOY % Change
Core CPI YOY % Change
YO
Y
(
%
)
C
h
a
n
g
e
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Personal Consumption Expenditures (PCE)
PCE Price Deflator
YOY % ChangePCE Core Deflator
YOY % ChangeFed Target
YO
Y
(
%
)
C
h
a
n
g
e
Consumer Price Index (CPI)for March surged 0.9%,the highest monthly rate since June 2022,and was up 3.3%on an annual basis
primarily due to spikes in energy and airfare prices.Notably,Core CPI was little changed with a monthly increase of 0.2%and an annual
rise of 2.6%as costs for services and other goods remained subdued.Personal Consumption Expenditures (PCE)were little changed in
February,with the headline PCE Price Index up 0.4%month-over-month and 2.8%year-over-year.The Fed’s preferred metric,Core PCE,
which excludes food and energy, rose 0.4% during the month and 3.0% from February of 2025.
Source: US Department of Labor Source: US Department of Commerce
INFLATION
6
ATTACHMENT B
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Retail Sales YOY % Change
YO
Y
(
%
)
C
h
a
n
g
e
The Conference Board’s Consumer Confidence Index edged up to 91.8 in March from 91.0 in February,a second consecutive gain that
nonetheless sits well below the all-time peak of 144.7 from early 2000.The Present Situation component rose 4.6 points to 123.3 on
favorable assessments of business and labor conditions,while the Expectations Index slipped 1.7 points to 70.9.Inflation expectations
climbed to their highest since August 2025,reflecting tariff passthrough and elevated gasoline prices. February retail sales rebounded
0.6%from January,with stronger auto and broad-based discretionary spending offsetting January’s weather-and vehicle-related
weakness; the control group also advanced 0.5%, signaling firmer underlying consumer demand.
0
20
40
60
80
100
120
140
160
In
d
e
x
L
e
v
e
l
Consumer Confidence
Recession
Source: US Department of Commerce Source: The Conference Board
All time high is 144.70 (1/31/00); All time low is 25.30 (2/28/09)
CONSUMER
7
ATTACHMENT B
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Leading Economic Indicators (LEI)
Recession
YO
Y
(%
)
C
h
a
n
g
e
-1.00
-0.75
-0.50
-0.25
0.00
0.25
0.50
0.75
1.00
Chicago Fed National Activity Index (CFNAI)
Recession
3
M
o
n
t
h
A
v
e
r
a
g
e
The Chicago Fed National Activity Index (CFNAI)fell to 0.11 in February,following a positive revision to 0.20 in January. The index’s
three month moving average edged up to 0.01 from 0.02 the prior month.Production and employment related indicators turned negative
in February,while sales,orders,and inventories also remained in negative territory.The personal consumption and housing categories
slipped modestly but stayed in positive territory.The Conference Board’s Leading Economic Index (LEI)declined 0.1%in January,an
improvement from
‑
0.2%in December,with consumer expectations and building permits the largest drags on the index.On a
year
‑
over
‑
year basis,the LEI fell 3.8%,continuing to signal slower economic growth heading into 2026.Notably,the latest LEI data do not
yet reflect the impact of the war in Iran.
Source: The Conference Board Source: Federal Reserve Bank of Chicago
LEADING INDICATORS OF ECONOMIC ACTIVITY
8
ATTACHMENT B
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
In
T
h
o
u
s
a
n
d
s
o
f
U
n
i
t
s
Annualized Housing Starts
Multi Family Housing Starts
Single Family Housing Starts
Housing starts rose 7.2%in January to an annualized pace of 1.487 million units, including 935,000 single-family and 552,000 multifamily
starts.The January S&P Cotality Case-Shiller 20-City Composite posted a 1.18%year-over-year gain,continuing deceleration from
December’s revised 1.43%annual increase.Inflation again outpaced home price appreciation,extending the erosion of real housing
returns that began in the second half of 2025.The Freddie Mac 30-year fixed mortgage rate climbed to 6.46%as of April 2,its fifth
consecutive weekly rise, reversing progress made when rates dipped below 6%in February.Higher borrowing costs and elevated prices
continue to constrain affordability.
Source: US Department of Commerce Source: S&P
-20.0%
-16.0%
-12.0%
-8.0%
-4.0%
0.0%
4.0%
8.0%
12.0%
16.0%
20.0%
24.0%
S&P/Case-Shiller 20 City Composite Home Price Index
Recession
YO
Y
(
%
)
C
h
a
n
g
e
HOUSING
9
ATTACHMENT B
40
45
50
55
60
65
70
Institute of Supply Management (ISM) Surveys
ISM Manufacturing ISM Services
EXPANDING
CONTRACTING
The Institute for Supply Management’s Manufacturing Index rose to 52.7 in March from 52.4,the fastest factory expansion since August
2022 and a third consecutive month above 50. Production accelerated to 55.1 from 53.5, though new orders decelerated to 53.5 from 55.8.
The prices subindex leaped to 78.3 from 70.5,reflecting elevated energy costs,metals tariffs,and Iran-related supply disruptions.
Employment remained in contraction at 48.7.The Services Index eased to 54.0 in March from 56.1 in February but still posted its 21st
consecutive month of expansion. The expansion was mainly from an increase in prices,amid higher oil and fuel costs.With both
measures above the 50 threshold, ISM data point toward a resilient if cost-pressured economy.
Source: Institute for Supply Management
SURVEY BASED MEASURES
10
ATTACHMENT B
Components of GDP 3/25 6/25 9/25 12/25
0.4% 1.7% 2.3% 1.3%
3.8% -2.7% 0.0% 0.4%
-4.7% 4.8% 1.6% -0.2%
-0.4% -0.4% 0.2% -1.2%
0.2% 0.3% 0.2% 0.2%
-0.6% 3.8% 4.4% 0.5%
State and Local (Consumption and Gross
Investment)
Personal Consumption Expenditures
Gross Private Domestic Investment
Net Exports and Imports
Federal Government Expenditures
Total
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Gross Domestic Product (GDP)
GDP QOQ % Change
GDP YOY % Change
Source: US Department of Commerce Source: US Department of Commerce
The third and final estimate of real gross domestic product (GDP)showed fourth-quarter growth revised down to 0.5%from the initial
1.4%estimate.The slowdown from 4.4%in the third quarter primarily reflected a sharp pullback in government spending,as the federal
government shutdown weighed on activity.The Bureau of Labor Statistics expects statistical distortions will persist into the spring due to
data collection disruptions. Personal Consumption Expenditures also declined across both goods and services.
GROSS DOMESTIC PRODUCT (GDP)
11
ATTACHMENT B
Source: Federal Reserve Source: Bloomberg
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
Federal Reserve Balance Sheet Assets
Recession
In
$
m
i
l
l
i
o
n
s
The Federal Reserve left its benchmark interest rate unchanged in March,keeping the target range at 3.50%to 3.75%following three
late 2025 rate cuts that were justified by signs of softening in the labor market.The Federal Open Market Committee minutes showed
some participants supported two-sided language on future rate direction given the upside risks to inflation and downside risks to
employment being elevated. However,policymakers have grown wary of potential inflationary pressures stemming from tariffs,the war in
Iran,and the ensuing spike in commodity prices.The Federal Reserve now projects just one rate cut in 2026,even as inflation
expectations rise. The Committee also reaffirmed its December decision to halt balance sheet runoff and to reinvest principal and interest
payments from its securities holdings,signaling a continued emphasis on maintaining ample reserves and supporting orderly market
functioning.
FEDERAL RESERVE
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
Recession
12
ATTACHMENT B
Source: Bloomberg Source: Bloomberg
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
US Treasury Note Yields
2-Year
5-Year
10-Year
Yi
e
l
d
(
%
)
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
US Treasury Yield Curve
Mar-26
Dec-25
Mar-25
Yi
e
l
d
(
%
)
At March month-end, the 2-year Treasury yield stood at 3.79%,down approximately 9 basis points from one year ago,while the 10-year
finished at 4.32%,roughly 11 basis points higher year-over-year.The spread between the two narrowed to 52 basis points,wider by 20
basis points year-over-year.The prior 2-year to 10-year inversion from July 2022 through August 2024 was historically long.The average
spread since 2005 is approximately 95 basis points, suggesting the current slope sits well below its long-run norm.The 3-month to 10-
year spread stood near 64 basis points at March month-end.
BOND YIELDS
13
ATTACHMENT B
ACCOUNT PROFILE
14
ATTACHMENT B
OBJECTIVES
Investment Objectives
liquid to meet all requirements that may be reasonably anticipated. The investment portfolio shall be designed with the
objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the
investment risk constraints and liquidity needs.
Chandler Asset Management Performance Objective
The performance objective for the portfolio is to earn a total rate of return through a market
cycle that is equal to or above the return on the benchmark index.
Strategy
In order to achieve these objectives, the portfolio invests in high quality fixed income securities that comply with the
investment policy and all regulation governing the funds.
15
ATTACHMENT B
STATEMENT OF COMPLIANCE
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
Rules Name Limit Actual Compliance
Status Notes
AGENCY MORTGAGE SECURITIES
Max % Issuer (MV)30.0 0.7 Compliant
Max Maturity (Years)10.0 2.8 Compliant
ASSET-BACKED SECURITIES (ABS)
Max % (MV; ABS & MBS)20.0 0.5 Compliant
Max % Issuer (MV)5.0 0.3 Compliant
Max Maturity (Years)5.0 4.6 Compliant
Min Rating (AA- by 1)0.0 0.0 Compliant
BANKERS' ACCEPTANCES
Max % (MV)40.0 0.0 Compliant
Max % Issuer (MV)5.0 0.0 Compliant
Max Maturity (Days)180.0 0.0 Compliant
COLLATERALIZED BANK DEPOSITS
Max % (MV)100.0 0.0 Compliant
COLLATERALIZED TIME DEPOSITS (NON-
NEGOTIABLE CD/TD)
Max % (MV; FDIC & Collateralized CD/TD)20.0 0.0 Compliant
Max % Issuer (MV)10.0 0.0 Compliant
Min Rating (A-1 by 1; A- by 1 if > FDIC Limit)0.0 0.0 Compliant
COMMERCIAL PAPER
Max % (MV)40.0 0.0 Compliant
Max % Issuer (MV)5.0 0.0 Compliant
Max Maturity (Days)397.0 0.0 Compliant
Min Rating (A-1 by 1 or A- by 1)0.0 0.0 Compliant
CORPORATE MEDIUM TERM NOTES
Max % (MV)30.0 7.7 Compliant
Max % Issuer (MV)5.0 0.7 Compliant
Max Maturity (Years)5.0 5.0 Compliant
Min Rating (A- by 1)0.0 0.0 Compliant
16
ATTACHMENT B
STATEMENT OF COMPLIANCE
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
Rules Name Limit Actual Compliance
Status Notes
FDIC INSURED TIME DEPOSITS (NON-NEGOTIABLE
CD/TD)
Max % (MV; FDIC & Collateralized CD/TD)20.0 0.0 Compliant
Max % Issuer (MV)10.0 0.0 Compliant
Min Rating (A-1 by 1; A- by 1)0.0 0.0 Compliant
FEDERAL AGENCIES
Max % (MV)100.0 16.7 Compliant
Max % Issuer (MV)30.0 5.6 Compliant
Max Callables (MV)20.0 11.6 Compliant
Max Maturity (Years)10.0 9.0 Compliant
GENERAL INVESTMENT GUIDELINES
Max % 5-10 Years Maturities (MV)30.0 9.8 Compliant
Max Maturity (Years)10.0 9.0 Compliant
LOCAL AGENCY INVESTMENT FUND (LAIF)
Max Concentration (MV)75.0 52.5 Compliant
LOCAL GOVERNMENT INVESTMENT POOL (LGIP)
Max % (MV)20.0 0.0 Compliant
MONEY MARKET MUTUAL FUNDS
Max % (MV)20.0 0.5 Compliant
Max % Issuer (MV)20.0 0.5 Compliant
Min Rating (AAA by 2)0.0 0.0 Compliant
MORTGAGE-BACKED SECURITIES (NON-AGENCY)
Max % (MV; ABS & MBS)20.0 0.5 Compliant
Max % Issuer (MV)5.0 0.0 Compliant
Max Maturity (Years)5.0 0.0 Compliant
Min Rating (AA- by 1)0.0 0.0 Compliant
MUNICIPAL SECURITIES
Max % (MV)30.0 0.0 Compliant *Based on legacy Investment Policy and time of purchase
Max % Issuer (MV)5.0 1.1 Compliant
Max Maturity (Years)10.0 8.8 Compliant
17
ATTACHMENT B
STATEMENT OF COMPLIANCE
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
Rules Name Limit Actual Compliance
Status Notes
Min Rating (A- by 1)0.0 0.0 Compliant
NEGOTIABLE CERTIFICATES OF DEPOSIT (NCD)
Max % (MV)30.0 2.5 Compliant
Max % Issuer (MV)5.0 0.0 Compliant
Max Maturity (Years)5.0 Compliant *Based on legacy Investment Policy and time of purchase
Min Rating (A-1 by 1 or A- by 1 if > FDIC Limit)0.0 0.0 Compliant
REPURCHASE AGREEMENTS
Max Maturity (Years)1.0 0.0 Compliant
SRI PROHIBITED INVESTMENTS
Prohibited Investment - Fossil Fuels 0.0 0.0 Compliant
Prohibited Investments - Firearms 0.0 0.0 Compliant
Prohibited Investments - Tobacco 0.0 0.0 Compliant
SUPRANATIONAL OBLIGATIONS
Max % (MV)30.0 7.4 Compliant
Max % Issuer (MV)10.0 4.2 Compliant
Max Maturity (Years)5.0 4.0 Compliant
Min Rating (AA- by 1)0.0 0.0 Compliant
U.S. TREASURIES
Max % (MV)100.0 11.4 Compliant
Max Maturity (Years)10.0 4.7 Compliant
18
ATTACHMENT B
ISSUERS
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
Issuer Investment Type % Portfolio
United States US Treasury 11.39%
Fidelity Cash 8.79%
LAIF LAIF 7.86%
Federal Home Loan Banks Agency 5.62%
Federal Agricultural Mortgage Corp Agency 5.01%
US Bank Cash 4.63%
International Bank for Recon and Dev Supras 4.24%
Farm Credit System Agency 2.93%
Federal Home Loan Mortgage Corp Agency 2.62%
Inter-American Development Bank Supras 2.46%
State of Hawaii Muni Bonds 1.10%
San Francisco City & County of Muni Bonds 1.02%
City of Oakland, California Muni Bonds 1.00%
State of Oregon Muni Bonds 0.93%
San Francisco California City & Coun Muni Bonds 0.87%
State of Georgia Muni Bonds 0.86%
Commonwealth of Massachusetts Muni Bonds 0.84%
Santa Monica Community College Distr Muni Bonds 0.76%
City of Los Angeles, California Muni Bonds 0.76%
Stanford University Corporate 0.72%
Federal Home Loan Mortgage Corp Agency CMBS 0.72%
Los Angeles Community College Distri Muni Bonds 0.70%
Alphabet Inc.Corporate 0.69%
International Finance Corporation Supras 0.67%
San Bernardino Community College Dis Muni Bonds 0.64%
Solano California Community College Muni Bonds 0.62%
Apple Inc.Corporate 0.62%
San Diego County Water Authority Muni Bonds 0.56%
Contra Costa Community College Distr Muni Bonds 0.56%
San Mateo Union High School District Muni Bonds 0.56%
19
ATTACHMENT B
ISSUERS
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
Issuer Investment Type % Portfolio
Andrew W. Mellon Foundation, The Corporate 0.56%
Marin California Community College D Muni Bonds 0.55%
First American Govt Oblig Fund Money Mkt Fd 0.54%
Federal National Mortgage Assoc Agency 0.54%
Palo Alto Unified School District Muni Bonds 0.50%
San Diego Unified School District Muni Bonds 0.47%
County of Alameda, California Muni Bonds 0.46%
The University of Chicago Corporate 0.46%
City of Glendora, California Muni Bonds 0.46%
Ohlone Community College District Muni Bonds 0.44%
State of Mississippi Muni Bonds 0.43%
State of Wisconsin Muni Bonds 0.42%
City of Manhattan Beach, California Muni Bonds 0.42%
Amazon.com, Inc.Corporate 0.41%
San Diego Community College District Muni Bonds 0.40%
City of Corona Muni Bonds 0.40%
State of New York Muni Bonds 0.38%
U.S. Bancorp Corporate 0.38%
Morgan Stanley Corporate 0.38%
Deere & Company Corporate 0.38%
Qualcomm Incorporated Corporate 0.38%
Northwestern Mutual Global Funding Corporate 0.37%
JPMorgan Chase & Co.Corporate 0.37%
Meta Platforms, Inc.Corporate 0.37%
Guardian Life Global Funding Corporate 0.37%
New York Life Insurance Company Corporate 0.37%
Simon Property Group, Inc.Corporate 0.37%
Wells Fargo & Company Cash 0.36%
Santa Clara VY California Water Dist Muni Bonds 0.36%
City of Chula Vista, California Muni Bonds 0.35%
20
ATTACHMENT B
ISSUERS
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
Issuer Investment Type % Portfolio
San Ramon Valley Unified School Dist Muni Bonds 0.34%
Santa Monica-Malibu Unified School D Muni Bonds 0.33%
Texas Public Finance Authority Muni Bonds 0.33%
City of Huntington Beach, California Muni Bonds 0.32%
Redwood City School District Muni Bonds 0.31%
State of Rhode Island Muni Bonds 0.30%
City of Fairfield, California Muni Bonds 0.30%
Riverside Community College District Muni Bonds 0.30%
Cabrillo California Cmmnty College Muni Bonds 0.29%
San Jose Unified School District Muni Bonds 0.29%
Los Angeles Department of Water and Muni Bonds 0.29%
Microsoft Corporation Corporate 0.28%
T-Mobile Us Trust 2026-1 ABS 0.28%
City of Santa Ana, California Muni Bonds 0.27%
Metropolitan Transport Commission Muni Bonds 0.26%
Deere & Company ABS 0.26%
Antelope Valley Cmnty College Dist Muni Bonds 0.24%
Yosemite Community California Colleg Muni Bonds 0.22%
Glendale California Unified School D Muni Bonds 0.22%
State of Colorado Muni Bonds 0.21%
Fullerton School District, Californi Muni Bonds 0.20%
South Pasadena Unified School Distri Muni Bonds 0.20%
The Regents of the University of Cal Muni Bonds 0.20%
Palomar California Community College Muni Bonds 0.20%
Redondo Beach California Unified Sch Muni Bonds 0.20%
City of Covina Muni Bonds 0.20%
Tustin Unified School District Schoo Muni Bonds 0.19%
San Dieguito Union High School Distr Muni Bonds 0.19%
Calleguas California Municipal Water Muni Bonds 0.19%
Minnesota Housing Finance Agency Muni Bonds 0.19%
21
ATTACHMENT B
ISSUERS
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
Issuer Investment Type % Portfolio
Santa Clarita California Community C Muni Bonds 0.19%
State of Texas Muni Bonds 0.18%
Sequoia Union High School District Muni Bonds 0.18%
Salesforce, Inc.Corporate 0.17%
Mountain View Whisman School Distric Muni Bonds 0.17%
Desert Community College District Muni Bonds 0.16%
Maryland Dep of Housing & Com Muni Bonds 0.16%
San Jose Evergreen California Commun Muni Bonds 0.16%
Sierra Joint Community College Distr Muni Bonds 0.15%
State of Alabama Muni Bonds 0.15%
State of Tennessee Muni Bonds 0.15%
Burbank California City Unified SD Muni Bonds 0.15%
Menlo Park California City School Di Muni Bonds 0.15%
Santa Cruz Metropolitan Transit Dist Muni Bonds 0.15%
The New York State Urban Development Muni Bonds 0.15%
Mount San Antonio California Communi Muni Bonds 0.14%
Los Angeles County California Public Muni Bonds 0.14%
City of La Habra, California Muni Bonds 0.14%
Beverly Hills Unified School Dist Muni Bonds 0.14%
Placentia-Yorba Linda California Uni Muni Bonds 0.13%
Desert Sands Unified School District Muni Bonds 0.13%
City of El Segundo Muni Bonds 0.13%
Beverly Hills Cali Public Finance Muni Bonds 0.12%
San Francisco Bay Area Rapid Transit Muni Bonds 0.12%
State of California Muni Bonds 0.11%
Huntington Beach California Public F Muni Bonds 0.11%
Santa Cruz County Capital Financing Muni Bonds 0.11%
California Infrastructure & Economic Muni Bonds 0.10%
Auburn California Muni Bonds 0.10%
Rancho Santiago Community College Di Muni Bonds 0.09%
22
ATTACHMENT B
ISSUERS
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
Issuer Investment Type % Portfolio
City of Buena Park, California Muni Bonds 0.09%
Rancho Water District Financing Auth Muni Bonds 0.09%
City of Ontario, California Muni Bonds 0.09%
Milpitas Unified School District Muni Bonds 0.09%
San Mateo-Foster City School Distric Muni Bonds 0.09%
Temecula Valley Unified School Distr Muni Bonds 0.09%
City of Pacifica, California Muni Bonds 0.09%
Pasadena Public Financing Authority,Muni Bonds 0.08%
San Juan Unified School District Muni Bonds 0.08%
Cash Cash 0.08%
Santa Clara County Muni Bonds 0.08%
State of Ohio Muni Bonds 0.08%
Liberty Union High School District Muni Bonds 0.07%
Oxnard Union High School District Muni Bonds 0.07%
Chabot-Las Positas Community College Muni Bonds 0.07%
City of Monterey Park, California Muni Bonds 0.07%
Tracy Joint Unified School District Muni Bonds 0.07%
Campbell California Union HS Muni Bonds 0.07%
Santa Barbara Unified School Distric Muni Bonds 0.07%
Santa Maria Joint Union High School Muni Bonds 0.07%
Roseville California Finance Authori Muni Bonds 0.06%
Torrance California Joint Powers Fin Muni Bonds 0.06%
San Jose, California Muni Bonds 0.05%
San Jose Financing Authority Muni Bonds 0.05%
City of San Ramon, California Muni Bonds 0.05%
Carlsbad Unified School District Muni Bonds 0.05%
Chaffey Community College District Muni Bonds 0.04%
Sunnyvale School District, Californi Muni Bonds 0.04%
Ledyard National Bank Neg CD 0.04%
Global Federal Credit Union Neg CD 0.04%
23
ATTACHMENT B
ISSUERS
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
Issuer Investment Type % Portfolio
Alliant Credit Union Neg CD 0.04%
American Express Company Neg CD 0.04%
The Peoples Bank Co.Neg CD 0.04%
Signature Federal Credit Union Neg CD 0.04%
The Pitney Bowes Bank Inc.Neg CD 0.04%
SPCO Credit Union Neg CD 0.04%
Workers Federal Credit Union Neg CD 0.04%
Austin Telco Federal Credit Union Neg CD 0.04%
County Schools Federal Credit Union Neg CD 0.04%
Baxter Credit Union Neg CD 0.04%
Enterprise Bank Neg CD 0.04%
UBS Bank USA, National Association Neg CD 0.04%
General Electric Credit Union Neg CD 0.04%
First Technology Federal Credit Unio Neg CD 0.04%
First Southwest Bank Neg CD 0.04%
Truist Bank Neg CD 0.04%
The Bippus State Bank Neg CD 0.04%
CNB Bank, Inc.Neg CD 0.04%
Capital Funding Bancorp, Inc.Neg CD 0.04%
Diversified Members Credit Union Neg CD 0.04%
Transportation Alliance Bank, Inc.Neg CD 0.04%
First Guaranty Bancshares, Inc.Neg CD 0.04%
Morgan Stanley Neg CD 0.04%
Wings Financial Credit Union Neg CD 0.04%
Healthcare Systems Federal Credit Un Neg CD 0.04%
Amerant Bank, National Association Neg CD 0.04%
Ally Bank Neg CD 0.04%
Southern Bank Neg CD 0.04%
Mutual Savings Association Neg CD 0.04%
Coöperatieve Rabobank U.A. NY Neg CD 0.04%
24
ATTACHMENT B
ISSUERS
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
Issuer Investment Type % Portfolio
Public Service Credit Union Neg CD 0.04%
Merrick Bank Neg CD 0.04%
Ponce Bank, National Association Neg CD 0.04%
County of Riverside, California Muni Bonds 0.04%
Eaglemark Savings Bank Neg CD 0.04%
Toyota Financial Savings Bank Neg CD 0.04%
GreenState Credit Union Neg CD 0.04%
Institution for Savings in Newburypo Neg CD 0.04%
Decorah Bank and Trust Company Neg CD 0.04%
Synchrony Bank Neg CD 0.04%
BankFirst Neg CD 0.04%
Pentagon Federal Credit Union Neg CD 0.04%
Monet Bank Neg CD 0.04%
Beal Financial Corporation Neg CD 0.04%
Delta National Bank and Trust Comp Neg CD 0.04%
Capital One Financial Corporation Neg CD 0.04%
Kennett Trust Bank Neg CD 0.04%
Connexus Credit Union Neg CD 0.04%
First Oklahoma Bank Neg CD 0.04%
First National Bank of America Neg CD 0.04%
First Community Credit Union of Belo Neg CD 0.04%
Cinfed Federal Credit Union Neg CD 0.04%
Encore Bank Neg CD 0.04%
Live Oak Banking Company Neg CD 0.04%
Silicon Valley Clean Water Muni Bonds 0.04%
Gesa Credit Union Neg CD 0.04%
Jonesboro State Bank Neg CD 0.04%
Sunwest Bank Neg CD 0.04%
Bank of Montreal Neg CD 0.03%
Minnwest Bank Neg CD 0.03%
25
ATTACHMENT B
ISSUERS
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
Issuer Investment Type % Portfolio
Legacy Bank & Trust Company Neg CD 0.03%
Farmers and Merchants State Bank Neg CD 0.03%
The Farmers & Merchants Bank Neg CD 0.03%
Central Bank Neg CD 0.03%
Country Club Bank Neg CD 0.03%
Berkeley California Unified SD Muni Bonds 0.03%
Pony Express Bank Neg CD 0.03%
Peoples Bank Neg CD 0.03%
USF Federal Credit Union Neg CD 0.03%
Fremont Union High School District Muni Bonds 0.03%
San Diego Association of Governments Muni Bonds 0.03%
City of Downey Muni Bonds 0.02%
Sonoma County California Junior Coll Muni Bonds 0.02%
Southern California Public Power Aut Muni Bonds 0.02%
Orchard California School District Muni Bonds 0.01%
TOTAL 100.00%
26
ATTACHMENT B
PORTFOLIO CHARACTERISTICS
Palo Alto Managed Acct | Account #11463 | As of March 31, 2026
Benchmark*3/31/2026
Portfolio
12/31/2025
Portfolio
Average Maturity (yrs)2.65 2.99 2.97
Average Modified Duration 2.47 2.63 2.56
Average Purchase Yield 3.04%2.81%
Average Market Yield 3.84%4.06%3.87%
Average Quality**AA+AA+AA+
Total Market Value 526,367,008 523,954,812
*Benchmark: ICE BofA 1-5 Year Unsubordinated US Treasury & Agency Index
**The credit quality is a weighted average calculation of the highest of S&P, Moody’s and Fitch.
27
ATTACHMENT B
SECTOR DISTRIBUTION
Palo Alto Managed Acct | Account #11463 | As of March 31, 2026
Sector as a Percentage of Market Value
Sector 03/31/2026 12/31/2025
Muni Bonds 39.41%40.63%
Agency 21.36%24.07%
US Treasury 14.55%11.15%
Corporate 9.78%5.95%
Supras 9.42%13.24%
Neg CD 3.18%3.77%
Agency CMBS 0.92%--
Money Mkt Fd 0.69%1.14%
ABS 0.69%--
CD --0.05%
28
ATTACHMENT B
QUALITY DISTRIBUTION
Rating 03/31/2026 12/31/2025
AAA 19.12%24.06%
AA 63.49%61.50%
A 3.77%0.72%
BBB 0.19%0.19%
A-1+1.89%1.90%
NA 11.48%11.58%
B 0.05%0.05%
Rating 03/31/2026 12/31/2025
Aaa 20.84%24.33%
Aa 61.99%61.50%
A 3.82%0.24%
P-1 1.89%1.90%
NA 11.45%12.04%
Rating 03/31/2026 12/31/2025
AAA 10.04%9.39%
AA 45.55%43.52%
A 1.55%0.14%
BBB 0.05%0.09%
F1+1.89%1.90%
NA 40.91%44.95%
Palo Alto Managed Acct | Account #11463 | As of March 31, 2026
S&P Rating Moody’s Rating Fitch Rating
29
ATTACHMENT B
0-.25 .25-.5 .5-1 1-2 2-3 3-4 4-5 5-7 7+
Portfolio 8.5%8.7%8.6%16.8%14.3%13.6%20.8%7.7%0.9%
ICE BofA 1-5 Year Unsubordinated US Treasury &
Agency Index 0.0%0.0%2.5%35.8%29.1%20.5%12.1%0.0%0.0%
DURATION DISTRIBUTION
Palo Alto Managed Acct | Account #11463 | As of March 31, 2026
Portfolio Compared to the Benchmark
30
ATTACHMENT B
TOTAL RATE OF RETURN*3 Months 12 Months 2 Years 3 Years 5 Years 10 Years Since Inception
Palo Alto Managed Acct 0.46%2.03%
Benchmark 0.20%1.55%
*Periods over 1 year are annualized.
Total rate of return: A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending market value; it includes interest earnings, realized
and unrealized gains and losses in the portfolio.
Benchmark: ICE BofA 1-5 Year Unsubordinated US Treasury & Agency Index
INVESTMENT PERFORMANCE
Palo Alto Managed Acct | Account #11463 | As of March 31, 2026
Total Rate of Return : Inception | 09/01/2025
31
ATTACHMENT B
PORTFOLIO CHARACTERISTICS
City of Palo Alto Reporting | Account #11464 | As of March 31, 2026
3/31/2026
Portfolio
12/31/2025
Portfolio
Average Maturity (yrs)0.00 0.00
Average Modified Duration 0.00 0.00
Average Purchase Yield 1.95%2.50%
Average Market Yield 1.95%2.50%
Average Quality**AAA AAA
Total Market Value 145,024,434 121,364,206
*Benchmark: NO BENCHMARK REQUIRED
**The credit quality is a weighted average calculation of the highest of S&P, Moody’s and Fitch.
32
ATTACHMENT B
SECTOR DISTRIBUTION
City of Palo Alto Reporting | Account #11464 | As of March 31, 2026
Sector as a Percentage of Market Value
Sector 03/31/2026 12/31/2025
Cash 63.67%65.29%
LAIF 36.33%34.71%
33
ATTACHMENT B
CONSOLIDATED INFORMATION
34
ATTACHMENT B
PORTFOLIO CHARACTERISTICS
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
3/31/2026
Portfolio
12/31/2025
Portfolio
Average Maturity (yrs)2.34 2.41
Average Modified Duration 2.06 2.08
Average Purchase Yield 2.81%2.75%
Average Market Yield 3.60%3.61%
Average Quality**AA+AA+
Total Market Value 671,391,442 645,319,018
*Benchmark: NO BENCHMARK REQUIRED
**The credit quality is a weighted average calculation of the highest of S&P, Moody’s and Fitch.
35
ATTACHMENT B
SECTOR DISTRIBUTION
City of Palo Alto Consolidated | Account #11465 | As of March 31, 2026
Sector as a Percentage of Market Value
Sector 03/31/2026 12/31/2025
Muni Bonds 30.87%32.97%
Agency 16.73%19.53%
Cash 13.79%12.32%
US Treasury 11.40%9.04%
LAIF 7.87%6.55%
Corporate 7.66%4.83%
Supras 7.38%10.74%
Neg CD 2.49%3.06%
Agency CMBS 0.72%--
Money Mkt Fd 0.54%0.93%
ABS 0.54%--
CD --0.04%
36
ATTACHMENT B
IMPORTANT DISCLOSURES
2026 Chandler Asset Management, Inc, An Independent Registered Investment Adviser.
Information contained herein is confidential. Prices are provided by ICE Data Services Inc (“IDS”), an independent pricing source. In the event IDS does not provide a price or if the
price provided is not reflective of fair market value, Chandler will obtain pricing from an alternative approved third party pricing source in accordance with our written valuation
policy and procedures. Our valuation procedures are also disclosed in Item 5 of our Form ADV Part 2A.
Performance results are presented gross-of-advisory fees and represent the client’s Total Return. The deduction of advisory fees lowers performance results. These results include
the reinvestment of dividends and other earnings. Past performance may not be indicative of future results. Therefore, clients should not assume that future performance of any
specific investment or investment strategy will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Economic factors,
market conditions or changes in investment strategies, contributions or withdrawals may materially alter the performance and results of your portfolio.
Index returns assume reinvestment of all distributions. Historical performance results for investment indexes generally do not reflect the deduction of transaction and/or
custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. It is not
possible to invest directly in an index.
Source ICE Data Indices, LLC (“ICE”), used with permission. ICE permits use of the ICE indices and related data on an “as is” basis; ICE, its affiliates and their respective third party
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This report is provided for informational purposes only and should not be construed as a specific investment or legal advice. The information contained herein was obtained from
sources believed to be reliable as of the date of publication, but may become outdated or superseded at any time without notice. Any opinions or views expressed are based on
current market conditions and are subject to change. This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied
upon as indicator of future results. Past performance is not indicative of future results. This report is not intended to constitute an offer, solicitation, recommendation or advice
regarding any securities or investment strategy and should not be regarded by recipients as a substitute for the exercise of their own judgment.
Fixed income investments are subject to interest, credit and market risk. Interest rate risk: the value of fixed income investments will decline as interest rates rise. Credit risk: the
possibility that the borrower may not be able to repay interest and principal. Low rated bonds generally have to pay higher interest rates to attract investors willing to take on
greater risk. Market risk: the bond market in general could decline due to economic conditions, especially during periods of rising interest rates.
Ratings information have been provided by Moody’s, S&P and Fitch through data feeds we believe to be reliable as of the date of this statement, however we cannot guarantee
its accuracy.
Security level ratings for U.S. Agency issued mortgage-backed securities (“MBS”) reflect the issuer rating because the securities themselves are not rated. The issuing U.S. Agency
guarantees the full and timely payment of both principal and interest.
LGIP Yields: Reported yields for local government investment pools may be presented as either the 30-day yield or the monthly distribution yield, as applicable. For certain funds,
the 30-day yield is calculated using reported daily yield data. Yield calculations are subject to change and may not be directly comparable across funds.
LAIF Yields: Additional Disclosure for CA Clients - As a result of a reporting lag from the Local Agency Investment Fund (LAIF), reported LAIF yields represent the most recently
available Daily Effective Yield and may reflect data from approximately 7–10 days prior to month-end.
37
ATTACHMENT B
BENCHMARK DISCLOSURES
Benchmark Disclosure
ICE BofA 1-5 Year Unsubordinated US
Treasury &Agency Index
The ICE BofA 1-5 Year Unsubordinated US Treasury & Agency Index tracks the performance of US dollar denominated US Treasury and
nonsubordinated US agency debt issued in the US domestic market. Qualifying securities must have an investment grade rating (based
on an average of Moody’s, S&P and Fitch). Qualifying securities must have at least one year remaining term to final maturity and less
than five years remaining term to final maturity, at least 18 months to maturity at time of issuance, a fixed coupon schedule, and a
minimum amount outstanding of $1 billion for sovereigns and $250 million for agencies.
38
ATTACHMENT B