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PFM Asset Management LLC <br />For the Quarter Ended March 31, 2022 <br />California Affiliated Risk Management Authorities Market Update <br />CITY OF REDWOOD CITY <br />For the Quarter Ended September 30, 2024 <br />Market Update <br />© PFM Asset Management LLC | pfmam.com <br />Current Market Themes <br />▸The U.S. economy is characterized by: <br />▹A labor market that reached better balance and supports consumer activity <br />▹Inflation that has made meaningful progress towards the Federal Reserve’s (Fed) 2% <br />target, although shelter costs remain a headwind <br />▹Resilient economic growth and consumer spending that support the ‘soft landing’ scenario <br />▸Fed begins the easing cycle <br />▹The Fed cut the federal funds target rate by 50 basis points (bps) to 4.75% - 5.00% at its <br />September FOMC meeting <br />▹Fed officials note they have gained greater confidence the risks to their dual mandate are <br />“roughly” in balance <br />▹The Fed’s September “dot plot” implies 50 bps of additional cuts in 2024 and 100 bps <br />through 2025 <br />▸Treasury yields continued their descent <br />▹Yields on maturities between 3 months and 10 years fell 62 -112 bps during the 3rd quarter <br />▹The yield curve began to disinvert in the 3rd quarter as the spread between the 2-year and <br />10-year Treasury reached positive territory for the first time in over 2 years <br />▹Despite intra-quarter spread widening, yield spreads across most credit sectors were <br />range bound at tight levels, reflecting the strength of the economy <br />Source: Bloomberg Finance L.P., as of September 30, 2024. <br />6.A. - Page 17 of 65 <br />26