Munis/Treasuries/Fed Funds

A Registered Investment Advisory Firm

Financial Literacy Day Session One – Munis/Treasuries/Fed Funds April 5, 2018

John R. Mousseau, CFA Executive Vice President & Director of Fixed Income john.mousseau@cumber.com

©

Copyright 2018 Cumberland Advisors®. Further distribution prohibited without prior permission.

Fed Fund Rate & Core CPI 11/1993 to 02/1995 6

5

4

3

2

1

0 93 93 93 93 93 9 4 9 4 94 94 94 94 94 9 4 94 94 9 4 9 4 9 4 9 4 94 94 94 94 94 9 4 9 4 94 94 94 94 94 9 5 9 5 v- ov- ec- ec- ec- an- an- eb- eb- ar- ar- pr- pr- ay- ay- un- un- ul- ul- ul- ug- ug- ep- ep- ct- ct- ov- ov- ec- ec- ec- an- ano J J J A A S S O O N N D D D J J F F M M A A M M J J J N N D D D J

Fed Funds Rate Source: Bloomberg Š

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Core CPI

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Fed Fund Rate & Core CPI 06/1998 to 06/2000 7

6

5

4

3

2

1

0 98 98 98 98 98 98 98 98 98 98 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 00 00 00 00 00 00 00 n- un- Jul- ug- ug- ep- ct- ct- ov- ec- an- an- eb- ar- ar- pr- ay- ay- un- Jul- Jul- ug- ep- ct- ct- ov- ec- ec- an- eb- eb- ar- pr- pr- ayu J J A A S O O N D J J F M M A M M J A S O O N D D J F F M A A M

Fed Funds Rate Source: Bloomberg Š

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Core CPI

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Fed Fund Rate & Core CPI 06/2004 to 06/2006 6

5

4

3

2

1

0 04 04 04 04 04 04 04 04 04 04 04 05 05 05 05 05 05 05 05 05 05 05 05 05 05 05 05 05 06 06 06 06 06 06 06 n- un- Jul- ug- ug- ep- ct- ct- ov- ec- ec- an- eb- ar- ar- pr- ay- ay- un- Jul- Jul- ug- ep- ep- ct- ov- ec- ec- an- eb- eb- ar- pr- pr- ayu J J A A S O O N D D J F M M A M M J A S S O N D D J F F M A A M

Fed Funds Rate Source: Bloomberg Š

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Core CPI

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Fed Fund Rate & Core CPI 09/2015 to 04/2018 2.5

2

1.5

1

0.5

0 15 15 15 15 15 16 16 16 16 16 16 16 16 16 16 16 16 16 17 17 17 17 17 17 17 17 17 17 17 17 17 18 18 18 p- ct- ct- ov- ec- an- eb- ar- pr- ay- un- Jul- ug- ep- ep- ct- ov- ec- an- eb- ar- pr- ay- un- Jul- ug- ep- ep- ct- ov- ec- an- eb- are S O O N D J F M A M J A S S O N D J F M A M J A S S O N D J F M

Fed Funds Rate Source: Bloomberg Š

Copyright 2018 Cumberland AdvisorsÂŽ. Further distribution prohibited without prior permission.

Core CPI

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Muni Yields - Post Brexit to Post Trump to Now

Apr. 03, 2018 Dec. 08, 2016 Jul. 06, 2016

Source: Bloomberg Š

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Muni Market Feast & Famine 2006 - 2018 This graph illustrates the performance of the municipal bond market since 2006. Since then, the market has experienced 3 major sell-offs: 1) Flight into Treasuries out of risk, 2) Panic selling because of Meredith Whitney, 3) Fears of Fed tapering.

2008 Financial 2008 Financial Crisis Crisis

Meredith Whitney Meredith Whitney Moment Moment

Tapering & Fund Tapering & Fund Outflows Outflows

Trump Trump Sell-Off Sell-Off High on 10/15/08: 8.01 Last Price: 3.76 Average: 4.52 Low on 07/06/16: 2.52

BREXIT BREXIT

Source: Bloomberg Š

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Fed Hike Cycle 2004-2006 Fed Hiking Cycle 2004-2006

Muni Yield Ratios Fell 103%-85%

Fed Funds Rate 30yr Treasury 10yr Treasury

Source: Bloomberg ©

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10 year US Government Bond yields 1946 - 2018 16.00 14.59 14.00

12.00

10.00

8.00

6.00

4.00 2.58 2.002.19

1.88

0.00 6 8 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 94 194 195 195 195 195 195 196 196 196 196 196 197 197 197 197 197 198 198 198 198 198 199 199 199 199 199 200 200 200 200 200 201 201 201 201 201 1 1 / 1 / 1/ 1 / 1 / 1/ 1 / 1/ 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1/ 1 / 1/ 1 / 1 / 1 / 1 / 1 / 1 / 1/ 1 / 1/ 1 / 1 / 1 / 1 / 1 / 1 / 1/ 1/ 1 / 1/ 1/ 1 / 1/ 1 / 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1 / 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ Source: www.multpl.com, Bloomberg Š

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10 year US Government Bond yields 1981 - 2018 16 14.59

14 12.57

12

10

8

6

4 2.58

2

1.88

0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 98 198 198 198 198 198 198 198 198 199 199 199 199 199 199 199 199 199 199 200 200 200 200 200 200 200 200 200 200 201 201 201 201 201 201 201 201 201 1 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1/ 1 / 1 / 1 / 1 / 1 / 1/ 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1/ 1 / 1 / 1 / 1 / 1 / 1/ 1 / 1 / 1/ 1 / 1 / 1 / 1 / 1/ 1 / 1 / 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1 / 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1 / 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/

Source: www.multpl.com, Bloomberg Š

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10 year US Government Bond yields 1946 - 1981 16

14 12.57

12

10

8

6

4

22.19

0 46 4 7 48 49 50 51 52 53 54 55 5 6 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 7 2 73 74 7 5 76 77 78 7 9 80 81 1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 / 1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 / 1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 /1 9 / 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1 / 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1 / 1/ 1/ 1/ 1/ 1/ 1/ 1 / 1/ 1/ 1/ 1/ 1/ Source: www.multpl.com, Bloomberg Š

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10 year US Government Bond yields 1946 - 1956 16

14

12

10

8

6

4 2.90

2.19

2

0 1/1/1946

1/1/1947

1/1/1948

1/1/1949

1/1/1950

Source: www.multpl.com, Bloomberg Š

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1/1/1951

1/1/1952

1/1/1953

1/1/1954

1/1/1955

1/1/1956

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Disclosure All material presented is compiled from sources believed to be reliable. However, accuracy cannot be guaranteed. Past performance is no guarantee of future results. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk.

Š

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