Tuesday, June 19, 2018
MANAGING DIRECTOR: Scott Carrithers   PORTFOLIO SALES AND SERVICE: Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty Kevin Doyle • Lonnie Harris •  Mark Tranckino • Robert Schuyler • Tom Toburen • Josh Kiefer  Nicole Burczyk • Kelley Frye • Natalie Regan • Aaron Stoffer • Chuck Honeywell • Gus Koppen

US Treasury Market
Date	1 mo	3 mo	6 mo	1 yr	2 yr	3 yr	5 yr	7 yr	10 yr	20 yr	30 yr
6/12/18	1.81	1.92	2.10	2.31	2.54	2.67	2.81	2.91	2.96	3.02	3.09
6/13/18	1.82	1.94	2.09	2.35	2.59	2.71	2.85	2.95	2.98	3.04	3.10
6/14/18	1.81	1.94	2.07	2.35	2.59	2.69	2.81	2.90	2.94	2.99	3.05
6/15/18	1.82	1.94	2.07	2.35	2.55	2.68	2.81	2.89	2.93	2.98	3.05
6/18/18	1.84	1.94	2.13	2.35	2.56	2.67	2.80	2.89	2.92	2.98	3.05

                                                                                      Source: U.S. Department of the Treasury, as of 06/18/2018 

U.S. and China
 
The back and forth threats between U.S. and China, the two largest economies of the world, are weighing on the markets.  Since Trump’s release last Friday identifying the list of items worth $50 billion that will have an imposed 25% tariff, China and the U.S. administration has been going back and forth on threats.  The most recent was from the Trump stating he will impose a 10% tariff on an additional $200 billion worth of items that would increase prices on everyday consumer goods like toys, t-shirts, tools, and more for U.S. shoppers.  This potential price increase would have an adverse effect on economic growth and have some investment professionals calling for a recession in 2019 if the threats realize. 
 
Investors have been migrating to safer assets causing stocks to fall and U.S. Treasuries to rally.  U.S. Treasury 10yr yield which spiked above 3.00% on the FOMC announcement last Wednesday have since retreated down to 2.85% early this morning.  The curve has also flattened on the back of the trade threats to its lowest level since before the Great Recession to 35bps.    
 
  
Source: Bloomberg 6/19/2018
 
Strategy: The threat to economic growth is very real with a potential domino effect.  Increased prices on consumer goods will likely decrease consumer spending which accounts for two-thirds of GDP.  And in the meantime, companies may hold off on spending plans for headcount or wages until trade relations settle that is already being seen from the tariffs on steel.  Though 35bps of yield premium is nothing to get excited about at all considering that is a 4.4 bps pick up per year, U.S. Treasury 10yr at 2.88% (currently) is still fairly close to recent high yields.  2.88% is better than the 2.15% or 1.40% that U.S. Treasury 10yr was yielding last year and the year before that.  It may be time to invest at these levels while it is here in case these threats materialize. 
                             

This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.

•Not FDIC Insured •No Bank Guarantee •May Lose Value