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PFM Asset Management LLCREDWOOD CITYFor the Quarter Ended September 30, 2017Portfolio ReviewOur outlook on each of the major investment-grade fixed income sectors is as follows:•Limited supply and robust demand are likely to keep yield spreads on federal agencies tight. Generally, we favor U.S. Treasuriesover agencies, except for new issues that offer a fair yield concession. Supranationals remain an attractive alternative.•Corporate fundamentals remain stable, and we continue to view the sector positively. However, recent richness in the sector warrants being more selective with industries, issuers, and individual issues.•In the credit space, we find that negotiable certificates of deposit (CDs) offer the best value, especially in the 2-year and under maturity range.•Taxable municipal security yields spreads are low and offer limited value. New issue volume is also down relative to last year, constraining supply.•ABS continue to offer opportunity for modest incremental yield. We continue to closely monitor developments in the underlyingcollateral.•Our view is less optimistic on the MBS sector as the Fed’s balance sheet reduction in this area should put upward pressure onyields. Shorter, more stable structures may offer opportunities, but supply is very limited.Outlook and Strategy96.1.A. - Page 14