Company: PAYX
Filing Date: 2025-03-26
Form Type: 10-Q
Source: 0000950170-25-045216
Chunk: 24

Company: PAYCHEX INC
Filing Date: 2025-03-26
Form: 10-Q
Item: Part I, Item 2
Chunk 24
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 manage the AFS securities to a benchmark duration of two to three and one-quarter years.

During the nine months, our primary short-term investment vehicles were U.S. government agency discount notes and bank demand deposit accounts. We have no exposure to high-risk or non-liquid investments. We have insignificant exposure to European investments. 

We periodically utilize derivative financial instruments to manage our interest rate risk. On January 31, 2025, we executed three Swaption Contracts with JPM. The Swaption Contracts qualify as cash flow hedges, have an aggregate notional amount of $3.0 billion, and are being utilized to manage exposure to fluctuations in benchmark interest rates associated with our anticipated issuance of long-term fixed rate debt to fund the planned acquisition of Paycor. The fair value of the Swaption Contracts was $3.4 million as of February 28, 2025.

During the nine months, the average interest rate earned on our combined funds held for clients and corporate cash equivalents and investment portfolios was 3.7% compared to 3.8% for the prior year period. When interest rates are falling, the full impact of lower interest rates will not immediately be reflected in net income due to the interaction of short- and long-term interest rate changes. During a falling interest rate environment, earnings will decrease from our short-term investments, and over time, decrease from our longer-term AFS securities. Earnings from AFS securities, which as of February 28, 2025 had an average duration of 2.2 years, would not reflect decreases in interest rates until the investments are sold or mature and the proceeds are reinvested at lower rates.

31 

The amortized cost and fair value of AFS securities that had stated maturities as of February 28, 2025 are shown below by expected maturity.

    February 28, 2025

    Amortized

    Fair

    In millions
     
    cost

    value

    Maturity date:

    Due in one year or less
     
    $
     
    460.1

    $
     
    455.4

    Due after one year through three years

    1,921.7

    1,868.4

    Due after three years through five years

    879.5

    867.9

    Due after five years

    211.7

    213.4

    Total
     
    $