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6.A. - Page 14 of 44 <br />REDWOOD CITY <br />Investment Strategy Outlook <br />• Our outlook for each of the major investment-grade fixed-income sectors are as follows: <br />For the Quarter Ended June 30, 2019 <br />Outlook <br />• Federal agency spreads are very tight and we expect them to remain so. Although callable agency spreads are wider than <br />they have been in a while, the sharp downward move in rates has reduced the likelihood of outperformance. <br />• In supranationals, supply constraints have led us to recalibrate our strategy to account for lower allocations. We will still <br />seek to add supranationals to the portfolio as attractive issues become available. <br />• As a result of the Fed's more accommodative stance and our positive view of the corporate sector, we will maintain <br />corporate allocations and seek to modestly extend the duration of our allocations, while remaining diligent in our issuer and <br />security selection process. <br />• ABS spreads have recently widened back to levels that offer attractive incremental income compared to government and <br />credit alternatives. We will seek to maintain allocations. <br />• Historically tight spreads have also reduced the range of high-quality, short-term credit issues that offer adequate <br />incremental income to warrant purchase. Careful maturity selection around Fed meeting expectations will be an important <br />consideration going forward, particularly with both the Treasury and credit yield curves inverted. <br />PFM Asset Management LLC 18 <br />