fixed income monthly market update · • robust labor market with a low unemployment rate of 3.6%...
TRANSCRIPT
© PFM 0
Fixed IncomeMonthly Market UpdateMay 2019
PFM Asset Management LLC
213 Market StreetHarrisburg, PA 17101
717.232.2723pfm.com
Prepared by the Portfolio Strategies Group
© PFM 1
Current Market Themes¥ U.S. economic conditions are characterized by:
• Above-trend GDP growth, with unusual contributing factors in Q1• Robust labor market with a low unemployment rate of 3.6%• Improving conditions in the housing market as mortgage rates have fallen• Potential imbalances, including a growing budget deficit, trade deficit, trade tensions, and challenges over border
security funding
¥ U.S. Treasury yields rose modestly in April and the yield curve steepened. But, yields remain lower on the year, and sharply lower from the cyclical peak levels from early November 2019.
¥ U.S. GDP grew at an annual rate of 3.2% in the first quarter of 2019, much stronger than expected. But, the strength was fueled by outsized growth in inventories, net exports, and state and local government expenditures. Consumer spending posted its 2nd lowest contribution in four years.
¥ The Federal Reserve reiterated its patient stance on monetary policy and held the fed funds target range at 2¼ to 2½%. Fed Chair Powell reaffirmed that the current “policy stance is appropriate,” remained optimistic on the economic outlook, and believed the underlying factors of keeping inflation low to be “transitory”.
¥ U.S equities continued their gains, with the S&P 500 and NASDAQ indices posting new record highs. Over the month, the S&P 500 advanced 4%, and is up 180% for the year, the strongest start to a year in decades. The Dow climbed 2.7% and the NASDAQ soared 4.8% in April.
¥ Global trade prospects remain in limbo, particularly as a trade and tariff war between the U.S. and China seemed imminent.
Commentary based on charts
© PFM 2
Current Economic Conditions
Source: Bloomberg, latest data available as of May 2019. SAAR is seasonally adjusted annualized rate. Wage growth is measured by average hourly earnings (YOY % change).
3.4%
2.2%
3.2%
-2%
0%
2%
4%
6%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2014 2015 2016 2017 2018 2019 2020
U.S. Real GDP Forecast To Slow(QoQ, SAAR) Forecast
60
80
100
120
140
160
Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19
Consumer Confidence Remains High
3.2%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19
Wage Growth Has Improved
6.2%
5.4%5.0%
4.4%
3.9%3.6%
3%
4%
5%
6%
7%
Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19
Unemployment Rate Near 50-Year Lows
© PFM 3
2.6%
2.4%
1.7%
Personal Consumption,
0.8%
4.2%
3.4%
2.2%
3.2%
-4%
-2%
0%
2%
4%
6%
8%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
U.S. GDP Contributors and DetractorsPersonal Consumption Fixed Investment Private Inventories Net Exports Gov't Expenditures
First Quarter GDP Beats Expectations
Source: Bureau of Economic Analysis, as of May 2019. 1th quarter contributions are based on the 1st GDP growth estimate.
2014 2015 2016 2017 2018 2019
¥ 1st quarter GDP growth was higher than expected at 3.2%
¥ Personal consumption, which typically accounts for the majority of GDP growth, posted its 2nd lowest contribution in 4 years; business investment was also slower than in previous quarters
¥ Typically a detractor, net exports contributed positively to GDP as export growth increased and import growth slowed, likely to get ahead of potential new rounds of tariffs
¥ Inventory growth also contributed to GDP growth
© PFM 4
Retail Sales Up 1.6% in March, Largest Gain Since September 2017
Source (top): U.S. Census Bureau, as of 4/18/19. Source (bottom): Bloomberg.
retail+1.6%
auto and other motor vehicles+3.3%
clothing and clothing accessories+2.0%
furniture and home furnishings+1.7%
food and beverage stores+1.0%
restaurants and bars+0.8%
electronics and appliances+0.5%
0.1% 0.3%
1.2%
0.2%0.6%
-0.1% -0.2%
1.0%
0.0%
-1.6%
0.8%
-0.2%
1.6%
-2%
-1%
0%
1%
2%
Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19
Retail Sales
© PFM 5
But Consumer Expectations Are Weakening
Source: Bloomberg and Conference Board, as of 4/30/2019.
-100
-75
-50
-25
0
25
50
75
100
Apr '71 Apr '75 Apr '79 Apr '83 Apr '87 Apr '91 Apr '95 Apr '99 Apr '03 Apr '07 Apr '11 Apr '15 Apr '19
Consumer Assessments of Future Expectations Minus Views on Current Conditions
Expectations - Present Situation
Consumers optimistic about the future
Consumers less optimistic about the future
© PFM 6
3.0%
3.5%
4.0%
4.5%
5.0%
Apr-16 Apr-17 Apr-18 Apr-19
30 Year Fixed Rate Mortgage Average
Housing Market Rebounds on Lower Mortgage Rates
Source: Bankrate.com U.S. Home Mortgage 30 Year Fixed National Average; Bloomberg, as of 4/30/19.
425k
475k
525k
575k
625k
675k
725k
775k
4.4
4.6
4.8
5.0
5.2
5.4
5.6
5.8
Mar-16 Mar-17 Mar-18 Mar-19
(mill
ions
)
Housing SalesExisting Home Sales (LT, mil.) New Home Sales (RT, thous.)
¥ Decreasing mortgage rates may be a boon to the housing market
¥ According to the Federal Home Loan Mortgage Corporation, mortgage demand rose to the highest level since the fall of 2016 amid increasing refinancing activity
© PFM 7
Fed Indicates No Rate Hikes in 2019
Source: Federal Reserve and Bloomberg. Individual dots represent each Fed members’ judgement of the midpoint of the appropriate target range for the federal funds rate at each year-end. Fed funds futures as of 4/30/19.
0%
1%
2%
3%
4%
5%
Fed Participants’ Assessments of ‘Appropriate’ Monetary Policy
Mar-19 FOMC Projections
Mar-19 Median
Fed Funds Futures
2019 2020 2021
Fed expects no hikes in 2019History of Recent
Fed Rate Hikes
Dec ’18 2.25 - 2.50%
Sept ’18 2.00 - 2.25%
Jun ’18 1.75 - 2.00%
Mar ’18 1.50 - 1.75%
Dec ’17 1.25 - 1.50%
Jun ’17 1.00 - 1.25%
Mar ’17 0.75 - 1.00%
Dec ’16 0.50 - 0.75%
Dec ’15 0.25 - 0.50%
Longer Term
Market is pricing in a 67% chance of a rate cut
by year end
© PFM 8
“Core inflation unexpectedly fell… and as of March stood at 1.6%... We suspect that some transitoryfactors may be at work. Thus, our baseline view remains that, with a strong job market andcontinued growth, inflation will return to 2% over time and then be roughly symmetric around ourlonger-term objective.”
-Jerome Powell, Fed ChairMay 1, 2019
Fed Keeps Rates Steady at May Meeting
Source: Federal Reserve.
• Information received since the FOMC met in March indicates that thelabor market remains strong and that economic activity rose at asolid rate.
• Job gains have been solid, on average, in recent months, and theunemployment rate has remained low. Growth of household spendingand business fixed investment slowed in the first quarter.
• On a 12-month basis, overall inflation and inflation for items other thanfood and energy have declined and are running below 2 percent. Onbalance, market-based measures of inflation compensation haveremained low in recent months, and survey-based measures of longer-term inflation expectations are little changed.
May
1• In support of the Committee’s goals, the Committee decided to maintain the target range for the
federal funds rate at 2¼ to 2½ percent.
© PFM 9
-0.50%
-0.25%
0.00%
0.25%
0.50%
0.75%
Apr '18 Jun '18 Aug '18 Oct '18 Dec '18 Feb '19 Apr '19
But, the Market Expects a Rate Cut by Year End
Source: Bloomberg, as of 4/30/2019.
2019 Rate MovesPriced into the Futures Market
-0.23%
1
3
2
Hikes
1
2
Cuts
© PFM 10
Treasury Yields Continue to Fall
Source: Bloomberg, as of 4/30/19.
1.00%
1.25%
1.50%
1.75%
2.00%
2.25%
2.50%
2.75%
3.00%
3.25%
Apr '17 Oct '17 Apr '18 Oct '18 Apr '19
2-Year Treasury
1.00%
1.25%
1.50%
1.75%
2.00%
2.25%
2.50%
2.75%
3.00%
3.25%
Apr '17 Oct '17 Apr '18 Oct '18 Apr '19
10-Year Treasury
Highest since 2011
Highest since 2008
2 year: USGG2YR Index10 year: USGG10YR Index
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2.41%2.28%
2.50%
1.25%
1.50%
1.75%
2.00%
2.25%
2.50%
2.75%
3.00%
3.25%
3M
1Y
2Y
3Y
4Y
5Y
10Y
30Y
Yiel
d
Maturity
April 30, 2019
December 31, 2018
December 29, 2017
Yield Curve Remains Partially Inverted
Source: Bloomberg, as of 4/30/19.
U.S. Treasury Yield Curve
© PFM 12
0100200300400500600700
Corporate Yield Spreads1-5 Year A-AAA (OAS)
Market Indicators Not Pointing to an Imminent Recession
Source: Bloomberg, as of 4/30/2019.
400600800
1,0001,2001,4001,600
Housing Starts (000s, saar)
-400
-200
0
200
400
600
Yield Curve (bps)10-year – 3-month
100k
200k
300k
400k
500k
600k
700k
Initial Jobless Claims
3035404550556065
ISM Manufacturing
-20%
-10%
0%
10%
20%
Index of Leading Indicators(SA, YoY)
© PFM 13
Leading Economic Index Improves for First Time in 5 Months
¥ The Leading Economic Index, a combination of various forward-looking economic metrics, improved in March after 5 months of declines. According to the Conference Board, the results “suggest that the expansion in economic activity should continue, but the pace of growth is likely to decelerate by year end.”
Source: LPL Research, Conference Board, latest data available as of May 3, 2019.
© PFM 14
Short-Term Yield Relationships Have Realigned
Source: Bloomberg and PFM Trading Desk, as of 4/30/2019. 3-Month CP yield spread based on A1/P1 rated CP index.
1.25%
1.50%
1.75%
2.00%
2.25%
2.50%
2.75%
3.00%
3.25%
Apr '18 Jul '18 Oct '18 Jan '19 Apr '19
2-year Treasury Effective Fed Funds 3-month CP
Prime MMF Assets: WMMFAMNA IndexGovt MMF Assets: WMMFAMAC Index
© PFM 15
Global Bonds Yielding Less Than 0% Hits $10 Trillion
Source: Bloomberg, as of 4/30/2019; Barclays.
$5
$6
$7
$8
$9
$10
$11
Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19
Trill
ion
Negative Yielding Issues in the Bloomberg Barclays Global Bond Aggregate
© PFM 16
Yield Environment as of April 30, 2019
Source: Bloomberg BVAL yield curves for Treasury and Corporate. TradeWeb for Federal Agency yields. 3-month corporate yields from commercial paper; A-1+ for AA and A-1 for A. Yields are for indicative purposes only; actual yields may vary by issue.
Maturity Treasury FederalAgency
AA Corporate
A Corporate
BBBCorporate
3-Month 2.41% 2.41% 2.52% 2.64% 2.85%
1-Year 2.37% 2.30% 2.54% 2.65% 2.89%
2-Year 2.27% 2.29% 2.54% 2.68% 2.97%
3-Year 2.24% 2.26% 2.56% 2.70% 3.04%
5-Year 2.28% 2.29% 2.73% 2.88% 3.31%
10-Year 2.50% 2.66% 3.19% 3.41% 3.98%
Treasury Curve: YCGT0025 IndexAgency Curve: various sourcesAA Corporate Curve: BVSC0073 Index; 3mo CP: DCPA090Y Index; 6mo CP: DCPA180Y IndexA Corporate Curve: BVSC0074 Index; 3mo CP :DCPB090Y Index; 6mo CP: DCPB180Y IndexTaxable Municipal Curve: BVSC1074 Index
© PFM 17
Implied Forward Treasury Rates Show Little Expected Change
Maturity Current Yield 1-year Forward
2-year Forward
3-year Forward
5-year Forward
1 year 2.39% 2.15% 2.17% 2.32% 2.69%
2 year 2.27% 2.16% 2.24% 2.39% 2.69%
3 year 2.24% 2.21% 2.31% 2.48% 2.72%
5 year 2.29% 2.35% 2.46% 2.58% 2.76%
7 year 2.40% 2.45% 2.55% 2.65% 2.80%
10 year 2.51% 2.56% 2.64% 2.72% 2.84%
30 year 2.93% 2.97% 3.01% 3.06% 3.13%
Source: Bloomberg, as of 4/30/19.
© PFM 18
Agency and Supranational Yield Spreads Very Tight
¥ Federal agency bullet spreads remain compressed near historic lows, with some issues at the same yield as comparable Treasuries.
¥ The expected Q1 surge in supranational supply has not materialized keeping their yield spreads also remain narrow.
Source: Bloomberg, TradeWeb, as of 5/06/19.
-0.05%
0.00%
0.05%
0.10%
0.15%
1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
Maturity (years)
Agency Yield Spreads
05/06/19 G Spreads 12 Mos Max
© PFM 19
Corporate Credit Spreads Return to Below Historical Averages
Source: Bloomberg, ICE BofAML Indices. OAS is option adjusted spread. As of 04/30/19.
0
100
200
300
400
500
600
700
Apr-01 Apr-03 Apr-05 Apr-07 Apr-09 Apr-11 Apr-13 Apr-15 Apr-17 Apr-19
Bas
is P
oint
s
Yield Spread (OAS) of 1-5 Year A-AAA Corporate Index
Post-Recession Avg = 87 bpsPre- Recession Avg = 79 bps
40
60
80
100
Apr '17 Apr '18 Apr '19
(bas
is p
oint
s)
© PFM 20
Asset-Backed Securities Present an Attractive Source of Relative Value
Source: Bloomberg, ICE BofAML Indices. OAS is option adjusted spread. As of 04/30/19.
0
10
20
30
40
50
60
70
Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19
Bas
is P
oint
s
Yield Spread (OAS) on Asset-Backed Securities
AAA Auto ABS AAA Credit Card ABS
© PFM 21
Strong Fixed Income Returns Year-To-Date (1-5 Year Indices)
Source: ICE BofAML Indices. MBS and ABS indices are 0-5 year, based on weighted average life.
1.52%1.71%
0.82%
1.83%
1.16%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
U.S
. Tre
asur
y
Agen
cy
Agen
cy M
BS
ABS
(AAA
)
Cor
p (A
-AAA
)
1.38% 1.30%
1.94%
1.46%
2.55%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
U.S
. Tre
asur
y
Agen
cy
Agen
cy M
BS
ABS
(AAA
)
Cor
p (A
-AAA
)
2018 Returns 2019 YTD Returns(through 4/30/2019)
© PFM 22
Treasury Returns by Maturity
Source: ICE BofAML Indices.
0.89%1.19%
1.67%2.06%
2.41%2.64% 2.80%
0-1
Year
s
1-3
Year
s
3-5
Year
s
5-7
Year
s
7-10
Yea
rs
10-1
5 Ye
ars
15+
Year
s
2018 ReturnsYTD Returns
(through 4/30/2019)
1.92%1.58% 1.47% 1.43%
0.88%
0.14%
-1.74%
0-1
Year
s
1-3
Year
s
3-5
Year
s
5-7
Year
s
7-10
Yea
rs
10-1
5 Ye
ars
15+
Year
s
© PFM 23
Sector Our Investment Preferences Comments
C O M M E R C I A L P A P E R/ C D
• Commercial paper/negotiable CD spreads have narrowed modestly over the past few months. Short credit remains higher-yielding than some longer-dated Treasuries.
T R E A S U R I E S • Treasury Bill supply increased in March but slowed in April, putting downward pressure on rates.
• The 3-month to 10-year part of the yield curve briefly inverted in the past two months, renewing concerns about a possible recession. With a flat-to-inverted yield curve, there is little expected roll-down.
T-Bill
T-Note
F E D E R A L A G E N C I E S • Federal agency spreads remain very tight. The only value has been in certain new issue securities
• Given the flat yield curve, callable agencies are more attractive due to their incremental yield benefit.
Bullets
Callables
S U P R A N A T I O N A L S • In supranationals, we continue to wait for expected supply to drive spreads wider. Until then, we will generally remain on the sidelines.
C O R P O R A T E S • Corporate yield spreads have narrowed back significantly, settling in around longer-term, post-recession historical averages. While the sector is no longer “cheap”, we plan to maintain allocations.
• The corporate spread curve remains positively sloped, offering modest value for extending maturities.
Financials
Industrials
S E C U R I T I Z E D • The AAA-rated ABS sector continues to offer attractive incremental income vs. government alternatives and offers a defensive outlet to credit exposure.
• With an improving fundamental landscape, Agency MBS are an attractive alternative to other government sectors due to their incremental income potential.
Asset-Backed
Agency Mortgage-Backed
M U N I C I P A L S • Munis continue to be expensive vs. Treasuries amid limited supply.
Current outlook Outlook one quarter ago Negative Slightly Negative Neutral Slightly
Positive Positive
Fixed-Income Sector Outlook – May 2019
© PFM 24
Fixed-Income Index Returns
Source: ICE BofAML Indices. Returns greater than one year are annualized.
April 30, 2019 Effective Duration Yield YTD 1 Month 3 Month 1 Year 3 Years 5 Years
1-3 Year IndicesU.S. Treasury 1.79 2.33% 1.19% 0.20% 0.92% 3.08% 1.05% 0.99% Agency 1.61 2.34% 1.18% 0.21% 0.89% 3.15% 1.23% 1.12% Corp A-AAA 1.82 2.76% 1.92% 0.27% 1.24% 3.91% 1.89% 1.73% MBS (0 to 3 Years) 4.07 3.00% 1.86% (0.33%) 1.09% 3.87% 1.63% 1.57% ABS (0 to 3 Years) 1.11 2.69% 1.37% 0.28% 1.02% 3.24% 1.75% 1.45%
1-5 Year IndicesU.S. Treasury 2.54 2.32% 1.38% 0.16% 1.05% 3.66% 1.02% 1.27% Agency 1.91 2.31% 1.30% 0.19% 0.99% 3.45% 1.24% 1.33% Corp A-AAA 2.56 2.84% 2.55% 0.27% 1.55% 4.64% 2.03% 2.12% MBS (0 to 5 Years) 3.61 2.97% 1.94% (0.01%) 1.21% 3.86% 1.37% 1.86% ABS (0 to 5 Years) 1.34 2.71% 1.46% 0.29% 1.11% 3.43% 1.78% 1.56%
Master Indices (Maturities 1 Year and Greater)U.S. Treasury 6.31 2.46% 1.85% (0.32%) 1.38% 4.78% 1.00% 2.14% Agency 3.99 2.49% 1.83% 0.00% 1.45% 4.40% 1.56% 2.00% Corp A-AAA 7.09 3.33% 4.66% 0.21% 2.74% 6.18% 2.70% 3.40% MBS (0 to 30 Years) 4.52 3.16% 2.14% (0.12%) 1.29% 4.93% 1.71% 2.43% Municipals 6.67 2.46% 3.38% 0.42% 2.61% 6.08% 2.59% 3.64%
© PFM 25
2,300
2,400
2,500
2,600
2,700
2,800
2,900
3,000
Jan '18 Apr '18 Jul '18 Oct '18 Jan '19 Apr '19
S&P 500 Price Change
Stock Market Hits New Record High
Source: Bloomberg, as of 04/30/2019.
2017 close
+25.3% since 12/24
-19.8%from Sept high
© PFM 26
U.S. Federal Budget Deficit Continues to Surge
Source: Bloomberg, as of 04/30/19. The fiscal year ends September 30, 2019.
-$439
-$587-$666
-$779
-1,600
-1,400
-1,200
-1,000
-800
-600
-400
-200
0
200
400
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$ in
billi
ons
Fiscal Year (ending September 30th)
Fiscal Year
Fiscal Year To Date
-$691 FYTD
-$8962019 est.
© PFM 27
¥ The debt ceiling funds commitments that Congress has already approved and are obligated to pay for
¥ Congress suspended the debt limit from February 9, 2018 until March 1, 2019
• During this period, the unconstrained national debt rose from $20.5 trillion to $22.0 trillion – an all-time high
¥ The Treasury has now implemented “extraordinary measures” meant to free up room under the reinstated ceiling to allow the government to continue to fund day-to-day government operations
• Includes suspending the issuance of SLGS and investments in certain governmental retirement programs/trust funds
• These measures will allow the government to fund vital operations until sometime late summer
Sources: U.S. Department of the Treasury, Bipartisan Policy Center, Bloomberg, as of 4/30/19.
U.S. Federal Government Debt Ceiling Reinstated
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
$22
$24
'91 '95 '99 '03 '07 '11 '15 '19
Trill
ions
U.S. Total Public Debt Outstanding
current debt ceiling: $22.0 trillion
© PFM 28
Geopolitical Risks Persist Around the Globe
North Korea tensions
South China Sea conflict
Russia – Ukraine tensions
Brexit, French protests, Italy’s budget woes, EU
fragmentation
Turkey currency crisis
U.S.- Iran Military
Escalation
US – Mexico border tensions
US – China trade tensions
Venezuela political crisis
Argentina currency crisis
US – Border Security Funding
Syria - US withdrawal
Indo-Pakistani Tensions
© PFM 29
New or Topical Material
© PFM 30
0
50
100
150
200
250
300
350
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Apr-17 Oct-17 Apr-18 Oct-18 Apr-19
Yiel
d
Flattening Yield Curve (10-Yr vs. 3-Mo)Spread 3-Month 10-Year
What We’re Watching…
Source: Bloomberg, yield spreads from ICE BofAML Indices, as of 04/30/19. Implied Fed rate hike probability, as of 04/30/2019.
5060708090
100110120130
Apr-17 Oct-17 Apr-18 Oct-18 Apr-19
Bas
is P
oint
s
1-5 Year Corporate Spreads
Spreads have narrowed as volatility has
subsided
Market Implied Fed Rate Hike Probability
Spreads widened on a stock market correction and concerns
about growth in Europe.
Target Rate
+9 bps
0%
20%
40%
60%
80%
100%
Jun '19 Sep '19 Dec '19
Impl
ied
Prob
abili
ty
Fed Meeting Dates
2.25-2.5%
2-2.25%
1.75-2%
1.5-1.75%
-1-1
-2-2 -3
Spreads widened dramatically due to
stock market volatility
00
0
-1
Maturity Treasury FederalAgency
AA Corporate
A Corporate
BBBCorporate
3-Month 2.41% 2.41% 2.52% 2.64% 2.85%
1-Year 2.37% 2.30% 2.54% 2.65% 2.89%
2-Year 2.27% 2.29% 2.54% 2.68% 2.97%
3-Year 2.24% 2.26% 2.56% 2.70% 3.04%
5-Year 2.28% 2.29% 2.73% 2.88% 3.31%
10-Year 2.50% 2.66% 3.19% 3.41% 3.98%
Yield Environment
© PFM 31
Housing Market
Source: Bloomberg, as of May 2019. SAAR is the seasonally adjusted annualized rate.
3,000
4,000
5,000
6,000
Mar '09 Mar '11 Mar '13 Mar '15 Mar '17 Mar '19
Existing Home Sales (000s, SAAR)
200
400
600
800
Mar '09 Mar '11 Mar '13 Mar '15 Mar '17 Mar '19
New Home Sales(000s, SAAR)
400
800
1,200
1,600
Mar '09 Mar '11 Mar '13 Mar '15 Mar '17 Mar '19
Housing Starts(000s, SAAR)
400
800
1,200
1,600
Mar '09 Mar '11 Mar '13 Mar '15 Mar '17 Mar '19
Building Permits(000s, SAAR)
Highest Since 2007
Highest Since 2007
Highest Since 2007 Highest Since 2007
Existing sales: ETSLTOTL IndexNew sales: NHSLTOT IndexStarts: NHSPSTOT IndexPermits: NHSPATOT Index
© PFM 32
Oil Up; Other Commodity Prices Mixed
Source: Bloomberg, as of 4/30/19.
$40
$50
$60
$70
$80
WTI Crude Oil (per barrel)
$1,150
$1,200
$1,250
$1,300
$1,350
$1,400
Gold (per oz.)
$8
$9
$10
$11
Soybeans (per bushel)
$12$14$16$18$20$22$24$26
Avocados (per 10 Kg)
© PFM 33
ISM Survey Indices Fall From Recent Strong Levels
Source: Bloomberg, as of 04/30/19.
45
50
55
60
65
Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19
ISM Manufacturing
45
50
55
60
65
Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19
ISM Non-Manufacturing
Highest Level Since Inception in 1997 Highest since 2004
© PFM 34
$0
$2
$4
$6
$8
$10
$12
$14
$16
(trill
ions
)
Total Household Debt
Mortgage HE Revolving Auto Loan Credit Card Student Loan Other
Consumer Debt Hits New Peak
Source: Federal Reserve Bank of New York Consumer Credit Panel/Equifax, as of Q4 2018
2008Q4 Total: $12.68 Trillion 2018Q4 Total: $13.54 Trillion$0.4
$1.5
$0.9
$1.3
$0.4
$9.1
© PFM 35
American Consumer Finances Are Strong
Source: Bloomberg, and Federal Reserve’s Financial Accounts of the United States - Z.1 (2018:Q4). Consumer balance sheet includes households and nonprofit organizations. Revolving credit includes overdraft plans on checking accounts and other loans without a fixed repayment schedule. All data, except the household debt service ratio is not seasonally adjusted.
Other Financial
Assets: 39%
Pension Funds: 21%
Deposits: 11%
Other tangible: 5%
Homes: 24%
Mortgages: 66%$0
$20
$40
$60
$80
$100
$120
$140
Total Assets Total Liabilities
Trill
ions
Consumer Balance Sheet - 4Q18
Total Assets: $120.4tn.
Total Liabilities: $16.1tn.
Other non-revolving: 1% Revolving: 7%Auto loans: 7%Other liabilities: 9%Student debt: 10%
4Q07:13.2%
4Q18:9.9%
9%
10%
11%
12%
13%
14%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
Deb
t Pay
men
ts a
s %
of
Dis
posa
ble
Per
sona
l Inc
ome
Household Debt Service Ratio
$0
$20
$40
$60
$80
$100
$120
Trilli
ons
Household Net Worth
© PFM 36
U.S. Federal Budget Deficit And Interest Cost Projected To Soar
Sources: Bureau of Fiscal Service, Congressional Budget Office. Data as of May 2019.
+$70B+26%
-$1,600
-$1,400
-$1,200
-$1,000
-$800
-$600
-$400
-$200
$0
$200
$400
1990 1995 2000 2005 2010 2015 2020 2025
Bill
ions
Federal Budget Deficit
CBO Forecast
2019:-$896 B
2025:-$1,189 B
$0
$100
$200
$300
$400
$500
$600
$700
$800
1990 1995 2000 2005 2010 2015 2020 2025
Bill
ions
U.S. Treasury Annual Interest Cost
CBO Forecast
2019:$382 B
2025:$721 B
© PFM 37
Archive
© PFM 38
Unemployment Rate Drops to 49-Year Low in April¥ The U.S. economy added 263,000 jobs in April, beating expectations of 190,000
• The unemployment rate edged lower to from 3.8% in March to 3.6% in April.• Average hourly earnings YoY remained at 3.2% in April, still near cyclical highs.
¥ So far in 2019, job gains have averaged a solid 205,000.
Source: Bloomberg, as of May 2019.
0k
100k
200k
300k
400k
Apr '14 Apr '15 Apr '16 Apr '17 Apr '18 Apr '19
Monthly Change in Nonfarm PayrollsNonfarm Payrolls 12-Month Moving Average
6.2%
5.4%5.0%
4.4%
3.9%
3.6%3%
4%
5%
6%
7%
8%
Apr '14 Apr '15 Apr '16 Apr '17 Apr '18 Apr '19
Unemployment Rate
Nonfarm payrolls: NFP TCH IndexUnemployment rate: USURTOT Index
© PFM 39
80%
81%
82%
83%
84%
85%
62%
63%
64%
65%
66%
67%
Apr
-08
Apr
-09
Apr
-10
Apr
-11
Apr
-12
Apr
-13
Apr
-14
Apr
-15
Apr
-16
Apr
-17
Apr
-18
Apr
-19
Prim
e-ag
e
Tota
l
Labor Force Participation Rate
Employment Indicators
Source: Bloomberg, most recent data as of May 2019. BLS defines “prime-age” as individuals ranging from 25 – 54 years of age.
Prime Age (rt)
Total (lt)
3.2%
1.0%
2.0%
3.0%
4.0%
Apr
-08
Apr
-09
Apr
-10
Apr
-11
Apr
-12
Apr
-13
Apr
-14
Apr
-15
Apr
-16
Apr
-17
Apr
-18
Apr
-19
Average Hourly Earnings(YoY %)
33.5
34.0
34.5
35.0
Apr
-08
Apr
-09
Apr
-10
Apr
-11
Apr
-12
Apr
-13
Apr
-14
Apr
-15
Apr
-16
Apr
-17
Apr
-18
Apr
-19
Total Private Sector Average Weekly Hours
17.1%
7.3%
4%
8%
12%
16%
20%
Apr
-08
Apr
-09
Apr
-10
Apr
-11
Apr
-12
Apr
-13
Apr
-14
Apr
-15
Apr
-16
Apr
-17
Apr
-18
Apr
-19
U-6 Underemployment Rate
LFPR Total: PRUSTOT IndexLFPR Prime-age: PRUSQNTS IndexU-6: USUDMAER IndexAHE: AHE YOY% IndexAvg Weekly hours: AWH TOTL Index
© PFM 40
Employment and Average Hourly Earnings By Industry
Source: Bloomberg, as of 04/30/2019. Employment and average hourly earnings by industry, seasonally adjusted. Bubble size represents employment level in thousands.
Construction
Manufacturing
Wholesale trade
Retail trade
Professional & business services
Education & health services
Leisure & hospitality
$10
$15
$20
$25
$30
$35
$40
$45
$50
-40 -20 0 20 40 60 80 100
Aver
age
Hou
rly E
arni
ngs
Employment Change MoM (thousands)
Natural Resources & Mining Construction ManufacturingWholesale trade Retail trade Transportation and warehousingUtilities Information Financial and InsuranceProfessional & business services Education & health services Leisure & hospitalityOther services
Total private: $27.77
© PFM 41
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
3M
1Y
2Y
3Y
4Y
5Y
10Y
30Y
Yiel
d
Maturity
April 30, 2019
December 31, 2018
September 28, 2018
Source: Bloomberg, as of 04/30/19.
Yield Curve Remains Partially Inverted
Tenor 04/30/19 Year-End12/31/18
Year-End09/28/2018
3 month 2.41% 2.35% 2.20%
1 year 2.37% 2.60% 2.56%
2 year 2.27% 2.49% 2.82%
3 year 2.24% 2.46% 2.88%
5 year 2.28% 2.51% 2.95%
10 year 2.50% 2.68% 3.06%
30 year 2.93% 3.01% 3.21%
U.S. Treasury Yield Curve
Inversion
© PFM 42© PFM 42© PFM 42
-600
-400
-200
0
200
400
600
1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019
Yiel
d Sp
read
(bps
)
10-year to 3-month US Treasury Yield Spread
Yield Curve Inverts
-200
-150
-100
-50
0
50
100
150
200
1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019
Yiel
d Sp
read
(bps
)
5-year to 2-year US Treasury Yield Spread
Yield Curve Inverts
Yield Curve Inversions Historically Precede Recessions
Source: Bloomberg, as of 04/30/2019.
© PFM 43
Yields Fall So Far in 2019
Source: Bloomberg, as of 04/30/19.
0.98%0.86%
0.60%0.49%
0.30% 0.25% 0.28% 0.27%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
3-month 12-month 2-Year 3-Year 5-Year 7-Year 10-Year 30-Year
2018 Change (12/31/17- 12/31/18)
0.06%
-0.22% -0.22% -0.22% -0.23% -0.20% -0.18%
-0.09%
-0.40%
-0.20%
0.00%
0.20%
3-month 12-month 2-Year 3-Year 5-Year 7-Year 10-Year 30-Year
U.S. Treasury Yields2019 YTD Change(12/31/18-04/30/19)
© PFM 44
The Fed’s Latest (March) Economic Projections Less Optimistic
Source: Federal Reserve, as of March 2019. Green denotes an improved projection in March compared to December, red for lower projection.
Indicator2019 2020 2021 Longer run
Dec. Mar. Dec. Mar. Dec. Mar. Dec. Mar.
Real GDP (YoY) 2.3% 2.1% 2.0% 1.9% 1.8% 1.8% 1.9% 1.9%
Unemployment Rate 3.5% 3.7% 3.6% 3.8% 3.8% 3.9% 4.4% 4.3%
PCE Inflation (YoY) 1.9% 1.8% 2.1% 2.0% 2.1% 2.0% 2.0% 2.0%
Core PCE (YoY) 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% - -
Federal FundsRate (Median) 2.9% 2.4% 3.1% 2.6% 3.1% 2.6% 2.8% 2.8%
© PFM 45
$0
$1
$2
$3
$4
$5
(trill
ions
)
Fed's Total Balance Sheet Assets
Treasury Mortgage-Backed Federal Agency Other
QE3QE2
Fed’s Balance Sheet Normalization Plan
¥ The Fed has been reducing their balance sheet by about $50 billion per month by letting existing holdings of Treasuries and agency MBS roll off.
• Starting in May, the Fed will reduce that amount by $15 billion, concluding the reduction of the holdings in the System Open Market Account (SOMA) at the end of September 2019.
• After that, it will shift, in part, reinvestment from principal payments on agency MBS into Treasuries but keep the overall balance sheet size stable.
Source: PFM, Bloomberg, The Federal Reserve, FRB of St. Louis, as of 04/24/19. Projection is based on maturity schedule of Fed’s Treasury holdings and caps on reinvestments as described in FOMC’s June 2017 addendum to the Policy Normalization Principles and Plans. Dec 2017 refers to peak before normalization.
Projection(in billion) Treasury
HoldingsMBS
HoldingsTotal Fed
Assets
Dec 2017(Peak) $2,454 $1,765 $4,449
Apr 2019 $2,154 $1,583 $3,928
Dec 2019(Projected) $1,997 $1,423* $3,611
Difference:3/19-12/19 $(157) $(160)* $(317)
*MBS projection assumes that principal payments will always exceed the cap over the horizon period (i.e. the monthly run off amount is equal to the cap). The calculated difference equals projected value minus current standing.
© PFM 46
Fed Balance Sheet Normalization
¥ During the March meeting, the Fed also announced changes to their ongoing balance sheet reduction measures, which
have been part of their monetary policy normalization plan since 2017
• The Fed has been reducing their balance sheet by about $50 billion per month by letting existing holdings of
Treasuries and agency MBS roll off
• Starting in May, the Fed will reduce that amount by $15 billion, concluding the reduction of the holdings in the
System Open Market Account (SOMA) at the end of September 2019
¥ After that, it will shift, in part, reinvestment from principal payments on agency MBS into Treasuries but keep the overall
balance sheet size stable
© PFM 47
The Federal Reserve Board and Federal Open Market Committee (FOMC)
Source: The Federal Reserve.
JeromePowell(Chair)
Board of Governors
Regional Fed Presidents(2019 FOMC voters) John
Williams(New York)
EstherGeorge
(Kansas City)
EricRosengren
(Boston)
Charles Evans
(Chicago)
James Bullard
(St. Louis)
RichardClarida
(Vice Chair)
LaelBrainard
RandalQuarles
Michelle Bowman
Vacant Vacant
© PFM 48
Credit Spreads Narrow and Remain Low by Historical Standards
Source: Bloomberg, ICE BofAML Indices. OAS is option adjusted spread. As of 04/30/19.
20
40
60
80
100
Apr '12 Apr '13 Apr '14 Apr '15 Apr '16 Apr '17 Apr '18 Apr '19
Bas
isi P
oint
s
Yield Spread (OAS) of 0-5 Year AAA Asset-Backed Securities Index
0
50
100
150
200
250
Apr '12 Apr '13 Apr '14 Apr '15 Apr '16 Apr '17 Apr '18 Apr '19
Bas
is P
oint
s
Yield Spread (OAS) of 1-5 Year Investment Grade Corporate Index
© PFM 49
Global Interest Rates Remain Low
Source: Bloomberg, as of 04/30/19.
-0.79% -0.59% -0.56% -0.57% -0.34% -0.36% -0.16%
0.48%0.76%
1.32%1.56%
2.27%
-1%
0%
1%
2%
3%
Sw
itzer
land
Ger
man
y
Fran
ce
Sw
eden
Spa
in
Por
tuga
l
Japa
n
Italy
U.K
.
Aus
tralia
Can
ada
U.S
.
2-Year Bond Yields
-0.32%-0.05%
0.01%0.30% 0.37%
1.00% 1.11% 1.18%
1.71% 1.79%
2.50% 2.55%
-1%
0%
1%
2%
3%
Sw
itzer
land
Japa
n
Ger
man
y
Sw
eden
Fran
ce
Spa
in
Por
tuga
l
U.K
.
Can
ada
Aus
tralia
U.S
.
Italy
10-Year Bond Yields
© PFM 50
Global Central Bank Policies Remain Generally Accommodative¥ The European Central Bank (ECB) sees rates “at their present levels at least through the end of 2019”. This extends the previous
soft end date of summer and suggests that monetary policy will remain loose for that much longer.
¥ The Bank of Japan (BOJ) also kept its ultra-loose monetary policy unchanged with a target short-term rate of -0.1% and 10-year rate of 0%. While the monthly bond purchases were maintained, BOJ governor expressed willingness to extend the trading ranges to keep implementing the yield curve control policy. Sluggish inflation remains a major concerns with the BOJ cutting itsforecast, indicating loose monetary conditions to persist for an extended period.
Source: Bloomberg, as of 04/30/19.
-1%
0%
1%
2%
3%
4%
5%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Central Bank Policy RatesECB BoJ
$0
$1
$2
$3
$4
$5
$6
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
(trill
ions
)
Central Bank Balance Sheet AssetsECB BoJ
Fed rate: FDTRFTRL IndexECB rate: EURR002W IndexBoJ rate: MUTKCALM IndexFed B/S: FARBAST IndexECB B/S: EBBSTOTA IndexBoJ B/S: BJACTOTL Index
© PFM 51
IMF Cuts Global Growth Forecasts Again
Source: IMF’s World Economic Outlook (WEO) April 2019, January’s Update, and WEO October 2018.
0% 1% 2% 3% 4% 5% 6% 7%
Emerging Markets
Developed Markets
UK
France
Germany
Japan
China
U.S.
World
IMF Growth Forecasts for CY 2019
Oct-18Jan-19Apr-19
© PFM 52
U.S. Equities Continue to Rebound
Source: Bloomberg, as of 04/30/19. Total Return is net of dividends.
-20%
0%
20%
40%
60%
80%
100%
120%
Apr '14 Apr '15 Apr '16 Apr '17 Apr '18 Apr '19
Cumulative 5-Year Total Return in Key U.S. Equity IndicesS&P 500 Dow Jones NASDAQ
Total Return as of 04/30/19
Index Year-to-Date 5-Year(Annualized)
S&P 500 18.2% 11.6%
Dow Jones 14.8% 12.6%
NASDAQ 22.4% 15.9%
© PFM 53
Financial Markets Enjoy Strongest Start to the Year In Over a Decade
Source: Deutsche Bank, as of 3/31/19.
© PFM 54
Oil Markets
*Forecasts are from the February 2019 EIA Short-Term Energy Outlook and start in 2019. U.S. crude oil inventories include the Strategic Petroleum Reserve. Active rig count includes both natural gas and oil rigs. WTI crude prices are monthly averages in USD using continuous contract NYM prices. Production and consumption
denoted in million barrels per day. Data as of 04/30/2019.
0
500
1,000
1,500
2,000
2,500
900
950
1,000
1,050
1,100
1,150
1,200
1,250
2014 2015 2016 2017 2018 2019
U.S. Crude Oil Inventories and Rig CountMillion barrels, number of active rigs
Inventories (Incl. SPR) Active rigs
Production 2015 2016 2017 2018 2019* Growth since '15
U.S. 15.1 14.8 15.7 17.9 19.8 29.8%
OPEC 36.4 37.4 37.3 37.3 35.9 2.4%
Global 97.0 97.4 98.0 100.5 101.6 5.1%
Consumption
U.S. 19.5 19.7 20.0 20.4 20.8 7.6%
China 12.4 12.8 13.4 13.9 14.3 16.2%
Global 95.9 96.9 98.5 99.9 101.4 6.5%
Inventory 1.10 0.45 1.33 0.56 0.17
$0
$20
$40
$60
$80
$100
$120
$140
$160
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Price of OilWTI crude, nominal prices, USD/barrel
© PFM 55
65
70
75
80
85
90
95
100
105
Apr-0
3
Apr-0
5
Apr-0
7
Apr-0
9
Apr-1
1
Apr-1
3
Apr-1
5
Apr-1
7
Apr-1
9
U.S. Dollar Index
-$80-$70-$60-$50-$40-$30-$20-$10
$0
Jan-
03
Jan-
05
Jan-
07
Jan-
09
Jan-
11
Jan-
13
Jan-
15
Jan-
17
Jan-
19
U.S. Trade Balance (Billions)
Factors Impacting the U.S. Dollar
Source: Bloomberg, as of 04/30/19.
-1%0%1%2%3%4%5%6%
Apr
-03
Apr
-05
Apr
-07
Apr
-09
Apr
-11
Apr
-13
Apr
-15
Apr
-17
Apr
-19
Sovereign Interest Rate DifferentialU.S. Treasury Germany Japan United Kingdom
© PFM 56
2018 U.S. Trade Deficit Jumps To Its Highest Level In Ten Years
Source: Bloomberg, as of 01/31/19. The fiscal year ends September 30, 2019.
-$709
-$552
-$621
-$800
-$700
-$600
-$500
-$400
-$300
-$200
-$100
$0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
(Bill
ions
)
Trade Deficit in Goods and Services
-$832-$807
-$891
-$1,000
-$900
-$800
-$700
-$600
-$500
-$400
-$300
-$200
-$100
$0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
(Bill
ions
)
Trade Deficit in Goods
© PFM 57
¥ Farmers are carrying the highest debt levels in over 30 years
¥ The trade war with China has hurt agricultural prices; soybean prices are approximately half of their 2012 prices
¥ In 2018, subsidies went into effect to ameliorate the negative consequences of the tariffs on farmers (soybean and hog exporters in particular); these subsidies are cut in the Administration's 2020 budget proposal
Source: Bloomberg, USDA, macrotrends.net.
Agricultural Debt at Highest Level Since 1984Farm Debt-to-Income Levels
14%
12%
10%
8%
6%
4%
2%
0%
6.5%
$8.51
$8
$10
$12
$14
$16
2014 2015 2016 2017 2018 2019
Soybean Prices (USD/bushel)
© PFM 58
2-Year U.S. Treasury Yield
Source: Bloomberg, as of 04/30/19.
2.97%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19
Average: 0.89%
42-year low: 0.15%
2.27%
© PFM 59
5-Year U.S. Treasury Yield
Source: Bloomberg, as of 04/30/19.
3.09%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19
Average: 1.69%
56-Year Low: 0.54%
2.28%
© PFM 60
10-Year U.S. Treasury Yield
Source: Bloomberg, as of 04/30/19.
3.24%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19
Average: 2.50%
56-Year Low: 1.36%
2.50%
© PFM 61
Key Inflation Indicators
Source: Bloomberg, most recent data as of May 2019. PCE, CPI,, PPI, hourly earnings, gold, oil, and euro are on a year-over-year basis.
Indicator 2016 2017 2018 Current YOY
PCE – Core 1.9% 1.6% 1.9% 1.6%
PCE – Aggregate 1.7% 1.8% 1.8% 1.5%
CPI – Core 2.2% 1.8% 2.2% 2.1%
CPI – Aggregate 2.1% 2.1% 1.9% 2.0%
PPI – Core 1.7% 2.2% 2.7% 2.4%
PPI – Aggregate 1.7% 2.5% 2.5% 2.2%
Gold 8.1% 13.5% -1.6% -2.4%
Crude Oil (WTI) 45.0% 12.5% -24.8% -6.8%
US$ per Euro -3.2% 14.1% -4.5% -7.1%
Avg. Hourly Earnings 2.7% 2.7% 3.3% 3.2%
© PFM 62
1-3 Year Index Returns
Source: ICE BofAML Indices. Returns greater than one year are annualized.
April 30, 2019 Effective Duration Yield YTD 1 Month 3 Month 1 Year 3 Years 5 Years
U.S. Treasury 1.79 2.33% 1.19% 0.20% 0.92% 3.08% 1.05% 0.99%
Agency 1.61 2.34% 1.18% 0.21% 0.89% 3.15% 1.23% 1.12%
Non-callable 1.71 2.36% 1.19% 0.21% 0.90% 3.16% 1.19% 1.10%
Callable 1.20 2.24% 1.13% 0.21% 0.85% 3.10% 1.35% 1.21%
U.S. Treasury/Agency 1.78 2.33% 1.19% 0.20% 0.92% 3.09% 1.06% 1.00%
Corp A-AAA 1.82 2.76% 1.92% 0.27% 1.24% 3.91% 1.89% 1.73%
Corp AAA 1.98 2.52% 1.47% 0.22% 1.05% 3.42% 1.40% 1.38%
Corp AA 1.78 2.68% 1.78% 0.25% 1.14% 3.83% 1.74% 1.60%
Corp A 1.83 2.79% 1.99% 0.28% 1.28% 3.95% 1.95% 1.78%
Corp BBB 1.81 3.11% 2.54% 0.40% 1.78% 4.46% 2.60% 2.19%
Corp/Govt 1.80 2.49% 1.46% 0.24% 1.07% 3.40% 1.37% 1.25%
MBS 0 - 3 4.07 3.00% 1.86% (0.33%) 1.09% 3.87% 1.63% 1.57%
ABS 0 - 3 1.11 2.69% 1.37% 0.28% 1.02% 3.24% 1.75% 1.45%
Corp/Govt/Mtge 1.81 2.49% 1.47% 0.24% 1.07% 3.41% 1.37% 1.26%
Supranationals 1.86 2.40% 1.30% 0.21% 1.02% 3.44% 1.34% 1.20%
© PFM 63
1-5 Year Index Returns
Source: ICE BofAML Indices. Returns greater than one year are annualized.
April 30, 2019 Effective Duration Yield YTD 1 Month 3 Month 1 Year 3 Years 5 Years
U.S. Treasury 2.54 2.32% 1.38% 0.16% 1.05% 3.66% 1.02% 1.27%
Agency 1.91 2.31% 1.30% 0.19% 0.99% 3.45% 1.24% 1.33%
Non-callable 2.08 2.36% 1.32% 0.18% 1.01% 3.45% 1.21% 1.32%
Callable 1.30 2.13% 1.22% 0.19% 0.92% 3.44% 1.35% 1.37%
U.S. Treasury/Agency 2.52 2.32% 1.37% 0.16% 1.05% 3.66% 1.04% 1.27%
Corp A-AAA 2.56 2.84% 2.55% 0.27% 1.55% 4.64% 2.03% 2.12%
Corp AAA 2.75 2.56% 1.93% 0.21% 1.24% 4.25% 1.45% 1.77%
Corp AA 2.40 2.71% 2.18% 0.20% 1.29% 4.37% 1.81% 1.96%
Corp A 2.60 2.89% 2.68% 0.30% 1.64% 4.73% 2.11% 2.18%
Corp BBB 2.68 3.27% 3.58% 0.51% 2.41% 5.37% 2.99% 2.64%
Corp/Govt 2.55 2.54% 1.87% 0.23% 1.32% 4.08% 1.47% 1.60%
MBS 0 - 5 3.61 2.97% 1.94% (0.01%) 1.21% 3.86% 1.37% 1.86%
ABS 0 - 5 1.34 2.71% 1.46% 0.29% 1.11% 3.43% 1.78% 1.56%
Corp/Govt/Mtge 2.69 2.60% 1.87% 0.20% 1.31% 4.06% 1.46% 1.64%
Supranationals 2.52 2.50% 1.71% 0.23% 1.30% 4.23% 1.52% 1.56%
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World Equity Index Returns
Source: Bloomberg. Returns greater than one year are annualized.
April 30, 2019 Country MTD QTD YTD 1 Month 3 Month 1 Year 3 Years 5 Years
AmericasDow Jones Industrial Average United States 2.7% 2.7% 14.8% 2.7% 7.0% 12.6% 17.1% 12.6% S&P 500 Index United States 4.0% 4.0% 18.2% 4.0% 9.5% 13.5% 14.9% 11.6% NASDAQ Composite Index United States 4.8% 4.8% 22.4% 4.8% 11.5% 15.8% 20.6% 15.9% Russell 2000 Index United States 3.4% 3.4% 18.5% 3.4% 6.5% 4.6% 13.6% 8.6% S&P/TSX Composite Index Canada 2.9% 2.9% 18.8% 2.9% 5.4% 4.8% 6.7% 1.4% BRAZIL IBOVESPA INDEX Brazil 0.0% 0.0% 7.8% 0.0% (8.4%) (1.0%) 16.2% 1.2%
EuropeEuro Stoxx 50 Pr Europe Union 5.4% 5.4% 16.0% 5.4% 9.9% (4.6%) 8.2% 1.2% FTSE 100 INDEX United Kingdom 2.7% 2.7% 14.6% 2.7% 7.4% (2.3%) 6.2% 0.6% CAC 40 INDEX France 4.9% 4.9% 16.5% 4.9% 10.4% (3.1%) 10.9% 3.4% DAX INDEX Germany 7.1% 7.1% 14.6% 7.1% 8.2% (9.3%) 6.4% 0.8% IBEX 35 INDEX Spain 4.5% 4.5% 11.5% 4.5% 4.6% (7.3%) 5.5% (1.9%)FTSE MIB INDEX Italy 3.3% 3.3% 18.2% 3.3% 9.2% (12.6%) 8.6% (0.9%)AEX-Index Netherlands 5.0% 5.0% 16.4% 5.0% 9.1% (1.3%) 12.2% 6.5% OMX STOCKHOLM 30 INDEX Sweden 6.6% 6.6% 15.5% 6.6% 8.4% 2.0% 5.3% 0.2% SWISS MARKET INDEX Switzerland 2.0% 2.0% 14.8% 2.0% 8.9% 10.0% 8.4% 3.2%
Asia / PacificNIKKEI 225 Japan 4.2% 4.2% 11.1% 4.2% 5.5% (1.1%) 11.2% 9.4% HANG SENG INDEX Hong Kong 2.3% 2.3% 15.2% 2.3% 6.7% (0.2%) 15.9% 9.7% S&P/ASX 200 INDEX Australia 1.7% 1.7% 14.1% 1.7% 6.4% 4.6% 9.9% 3.3%
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Disclosures
This material is based on information obtained from sources generally believed to be reliable and available to the public, however PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or a specific recommendation. All statements as to what will or may happen under certain circumstances are based on assumptions, some but not all of which are noted in the presentation. Assumptions may or may not be proven correct as actual events occur, and results may depend on events outside of your or our control. Changes in assumptions may have a material effect on results. Past performance does not necessarily reflect and is not a guaranty of future results. The information contained in this presentation is not an offer to purchase or sell any securities.