2017/03/29 Council Agenda Packet

R1.x • DISCOUNT- 1. (n.)selling below par; e.g., a $1000 bond selling for $900. 2. (v.) anticipating the effects of news on a security's value;e.g., "The market had already discounted the effect of the labor strike by bidding the company's stock down." DIVERSIFICATION - Dividing available funds among a variety of securities and institutions so as to minimize market risk. EFFECTIVE RATE-The yield you would receive on a debt security over a period of time taking into account any compounding effect. FACE VALUE-The value of a bond stated on the bond certificate;thus,the redemption value at maturity. Most bonds have a face value,or par,of$1,000. FEDERAL AGENCY SECURITIES - Several government-sponsored agencies,in recent years, have issued short and long-term notes.Such notes typically are issued through dealers, mostly investment banking houses.These Federal government-sponsored agencies were established by the U.S.Congress to undertake various types of financing without tapping the public treasury.In order to do so,the agencies have been given the power to borrow money by issuing securities, generally under the authority of an act of Congress.These securities are highly acceptable and marketable for several reasons, mainly because they are exempt from state, municipal and local income taxes. Furthermore,agency securities must offer a higher yield than direct Treasury debt of the same maturity to find investors, partly because these securities are not direct obligations of the Treasury. The main agency borrowing institutions are the Federal National Mortgage Association (FNMA), the Federal Home Loan Bank System (FHLB),and the Federal Farm Credit System (FFCS). FHLB- FEDERAL HOME LOAN BANK SYSTEM -consists of twelve Federal Home Loan Banks. The FHLB issues, in addition to long-term bonds, coupon notes with maturities of up to one year.Their attractiveness stems from their investment denominations of$10,000 to $1 million. FEDERAL DEPOSIT INSURANCE (FDIC) -A Federal institution that insures bank deposits. The current limit is up to $100,000 per depository account. FEDERAL FUNDS RATE-The rate of interest at which Federal Funds are traded between banks.Fed Funds are excess reserves held by banks that desire to invest or lend them to banks needing reserves.The particular rate is heavily influenced through the open market operations of the Federal Reserve Board.Also referred to as the"Fed Funds rate." FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - FNMA, like GNMA,was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a Federal corporation working under the auspices of the Department of Housing and Urban Development, HUD.It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation.The corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA's securities are also highly liquid R, City of Everett Investment Policy(2017)