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6.A. - Page 13 of 37 <br />REDWOOD CITY <br />Investment Strategy Outlook <br />Attachment A <br />For the Quarter Ended March 31, 2019 <br />Outlook <br />• With the Fed on hold and the market's current outlook for lower future interest rates, we will maintain a neutral duration posture in <br />the portfolio relative to the benchmark. <br />• As a result of the outlook for slower economic growth, we continue to recommend maintaining diversification among investment <br />grade sectors with a tilt toward higher grade corporate bonds given their income-producing potential. <br />• Our outlook for each of the major investment-grade fixed-income sectors are as follows: <br />• As federal agency spreads remain very tight, we expect agency purchases to be minimal, seeking better value in either <br />Treasuries or other sectors. Given the inverted -to -flat yield curve, we will also evaluate callable agencies for their <br />incremental yield. <br />• In supranationals, we will wait for the expected increase in supply to drive spreads wider. Until then, we will generally <br />remain on the sidelines. <br />• In the corporate sector, yield spreads have narrowed, settling in around longer-term, post -recession historical averages. <br />Although the Treasury yield curve is flat, the corporate spread curve remains positively sloped, offering value for extending <br />maturities. But, given international growth concerns, we remain diligent in our issuer and security selection process. <br />• Allocations to AAA -rated ABS will be maintained. The sector offers an attractive incremental income compared to similar <br />duration government securities and continues to offer a defensive outlet relative to other credit instruments. <br />• Short-term, high quality credit in the form of negotiable certificates of deposit offer good income potential, especially in <br />light of the partially inverted Treasury yield curve. <br />PFM Asset Management LLC 22 <br />