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REDWOOD CITY <br />A Flattening Yield Curve <br />For the Quarter Ended December 31, 2017 <br />Market Update <br />• The yield on the 2 -year U.S. Treasury note has increased by 70 basis points (0.70%) this year, while the yield on the 10 -year U.S. <br />Treasury note has decreased by 3 basis points (0.03%) since the beginning of the year as expectations of future growth and inflation <br />prospects have fallen. <br />• As a result, the spread between the 10 -year U.S. Treasury and the 2 -year U.S. Treasury is currently near a 10 -year low. <br />10-Year/2-Year U.S. Treasury Spread <br />January 1, 2002 — December 31, 2017 <br />3.50% <br />3.00% <br />2.50% <br />2.00% <br />1.50% <br />1.00% <br />0.50% <br />0.00% <br />10 -year low <br />-0.50% <br />Jan '02 Jan '04 <br />Source: Bloomberg, as of 12/31/17. <br />PFM Asset Management LLC <br />Jan '06 Jan '08 Jan '10 Jan '12 Jan '14 Jan '16 <br />13 <br />