1. B. Craig Elder Director Senior Fixed Income Analyst
WGFOA Fall Conference
Title Slide
B. Craig Elder
Director
Senior Fixed Income Analyst
Please Note: Information in this presentation is as of September 9, 2014 or prior.

2. 10-Year Interest Rates – from 1790
Source: Goldman Sachs
10 year taxable

3. Treasury Yield Curve Source: Bloomberg

4. Why Buy American Debt? Source: Bloomberg
G7 Current 10-year Yields
United States -2.49%
Japan – 0.53%
Germany – 1.00%
France – 1.35%
Canada – 2.17%
United Kingdom – 2.48%
Italy – 2.37%

5. Comparative Total Returns –September 5, 2014 Source: CreditSights

6. Corporate Bond Indices – August 29, 2014 Source: CreditSights

7. Source: Walt Handelsman - Newsday
Economic Activity

8. Economic Indicators GDP Inflation Housing New Home Sales*
Existing Home Sales*
Consumer
Personal Income
Personal Spending*
Retail Sales*
Manufacturing
Cap Utilization*
Industrial Production*
Inflation
PCE Core*
CPE Deflator
Consumer Price Index
Producer Price Index
Average Hourly Earnings*

9. Economic Growth – 1980-2014 Source: Bloomberg

10. Single Family Existing Home Sales – 1980-2014 Source: Bloomberg

11. Single Family New Home Sales – 1980-2014 Source: Bloomberg

12. Industrial Production – 1980-2014 Source: Bloomberg

13. Capacity Utilization – 1980-2014 Source: Bloomberg

14. Personal Consumption – 2000-2014 Source: Bloomberg

15. Personal Consumption – 2000-2014 Source: Bloomberg

16. Inflation – 1980-2014 Source: Bloomberg

17. Average Hourly Earnings – 2007-2014 Source: Bloomberg

18. Key to Economy – Innovative New Jobs

19. Beneficiaries of Economic Innovation

20. Measures of Unemployment Source: Bureau of Labor Statistics
U-1: Persons unemployed 15 weeks or longer, as a percent of the civilian labor force;
U-2: Job losers and persons who completed temporary jobs, as a percent of the civilian labor force;
U-3: Total unemployed, as a percent of the civilian labor force (this is the definition used for the official unemployment rate);
U-4: Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers;
U-5: Total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers; and
U-6: Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.

21. U.S. Unemployment Rate U-3 Source: Bloomberg

22. U.S. Under-Employment Rate (U6) Source: Bloomberg

23. U.S. Non-farm Payrolls 1990-Present Source: Bloomberg

24. U.S. Non-farm Payrolls 1939-Present Source: Bloomberg

25. The Federal Reserve
What’s Next?

26. What’s the Fed Doing? Asset Purchases Interest Rate Policy
Purchase of $15 billion of Treasury debt per month
Purchase of $10 billion of MBS per month
September 30 meeting – More Tapering?
Will End in October
Interest Rate Policy
Extension of the % interest rate “guidance”
No change since December 2008
Last raised rates in May 2006
To 5.25% from 5.00%
Will raise rates in 2015 – question is when?????
Market view is June or July

27. Security Holdings of The Fed Source: New York Federal Reserve
Portfolio Holdings - $4.140 Trillion
Treasury (9.80 WAL) – MBS & Agency
Treasuries - $2.420 Trillion
MBS (Fannie/Freddie/Ginnie) - $1.678 Trillion
Fannie/Freddie/Ginnie Debt - $ Billion

28. Foreign Holdings of U.S. T-Notes & Bonds SOURCE: Bloomberg

29. Fed’s Holdings of U.S. T-Notes & Bonds SOURCE: Bloomberg

30. Who’s on First? New Fed Chair - Janet Yellen
Former Vice Chair & San Fran Fed President
New Fed Vice Chair - Stanley Fischer
Formerly Head of Israeli Central Bank
Lael Brainard - Federal Reserve Board
Formerly Under Secretary of the Treasury for International Affairs
Loretta Mester – New Cleveland Fed President (June 1)
Economist with Philadelphia Fed

31. 2014 FOMC Voting Members Source: Federal Reserve
Charles Plosser – Philadelphia
Richard Fisher – Dallas
Loretta Mester – Cleveland
Jerome Powell – Governor
Unfilled - Governor
Daniel Tarullo – Governor
Lael Brainard – Governor
William Dudley – New York
Stanley Fischer – Vice Chair, FRB
Janet Yellen – Chairman
Narayana Kocherlakota – Minneapolis

32. 2014 FOMC Voting Members Source: Robert W. Baird

33. 2015 FOMC Voting Members Source: Robert W. Baird

34. Source: Clay Bennett.com
Economic & Interest Rate Forecast

35. U.S. Econ Forecasts – Street & Fed September 9, 2014 Source: Bloomberg

36. U.S. Interest Rate Forecast - Street September 9, 2014 Source: Bloomberg

37. Sources: Bloomberg Bank America Merrill Lynch
Barclays Indices – Total Return Chart
Bureau of Labor Statistics
ritholz.com
Business.cartoons.co.uk
Claybennet.com
CreditSights
Federal Reserve Bank of new York– SOMA Account Holdings
Goldman Sachs
SNBCHF.com
Walt Handelsman - Newsday

38. Disclaimers
The opinions expressed are those of the presenters and not necessarily of Robert W. Baird & Co. Past performance is not a guarantee of future results. Robert W. Baird & Co., Inc. Member SIPC