Agenda item

            The Sub Committee received a report of the Operational Director, Financial Services which updated the Sub Committee about the activities undertaken on the money market, as required by the Treasury Management Policy.

 

The Sub Committee was advised that the base rate fell from 5.25% to 5.00% on 10th April 2008 and that this was the fourth consecutive cut in the base rate. This meant that the Monetary Policy Committee was facing a testing period. With inflation rising and the economy slowing, there was little room to manoeuvre with interest rates.

           

The Sub Committee was also advised that longer rates firmed up during the period and were never attractive enough for the authority to consider new borrowing and the PWLB rates were for “lower quota” entitlements.

 

            Furthermore the turnover during period, as shown in the table below:

 

	No. Of	Turnover
	Deals Struck	£m
Short Term Borrowing	5	10.40
Short Term Investments	42	58.75

 

It was noted that the turnover on investments was relatively low, reflecting the fixture of the bulk of the Council’s investments into fixed rate, fixed term deals before Christmas in anticipation of rates falling.

 

            The Sub Committee was informed of the position at Month End, as detailed below;

 

	April	May	June
	£m	£m	£m
Short Term Borrowing	1.00	NIL	2.50
Short Term Investments	41.20	48.25	45.20

 

It was noted that the authority’s cash flow through the period was positive, which was normal for the early part of the financial year as grant and council tax income was received.

 

The Sub Committee was informed of the forecast income and outturn for the quarter was as follows:

 

	Cumulative	Cumulative	Cumulative	Cumulative
	Budget	Actual	Target Rate	Actual Rate
	£’000	£’000	%	%
Quarter 1	458	674	5.08	5.87
Quarter 2	936	0	0.00	0.00
Quarter 3	1,331	0	0.00	0.00
Quarter 4	1,700	0	0.00	0.00

 

It was noted that the target income was exceeded due to the excellent rate of interest currently being earned on investments. By locking investments in for slightly longer periods last year, the investment rate was secure well into the current year.

 

It was noted that the authority did not borrow any new long term money. Three longer investment deals (greater then 12 months) had been undertaken during the period all for £2.5m. They were placed at 6.20%, 6.52% and 6.56%.

 

            The Sub Committee was advised of the actions taken in relation to policy guidelines

 

·        Interest Rate Exposure was complied with;

·        Approved Counterparty List – following various reports from the credit rating agencies, the authority had been particularly careful in placing money into investments, especially for those deals of longer duration. During the quarter a one year investment was made with Derbyshire Building Society which meant that the limit for funds lent (limit £2.5m actual £5m) for more than three months with that organisation was exceeded for 14 days. It was felt that the Derbyshire was the best counterparty on the day offering the particular rate which was being sought. This decision reflects the difficulty in finding a secure place for money being placed into the market for longer periods. The period of exposure had now lapsed and the current lending to this organisation was back within the set limits;

·        Borrowing Instruments was complied with; and

·        Prudential Indicators were complied with:

-                   Operational Boundary for external debt;

-                   Upper limit on interest rate exposure on fixed rate debt;

-                   Upper limit on interest rate exposure on variable rate debt;

-                   Maturity structure of borrowing as a percentage of fixed rate borrowing;

-                   Total principal sums invested for periods longer than 364 days;

-                   Maturity Structure of New Fixed rate Borrowing during 2005/06.

 

RESOLVED: That the report be noted.