A Registered Investment Advisory Firm
Financial Literacy Day February 14, 2020
John R. Mousseau, CFA President, Chief Executive Officer & Director of Fixed Income john.mousseau@cumber.com
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30yr Treasury Vs. Core CPI 30yr spread
Source: Bloomberg ©
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Bond Buyer 40 Yield Vs. Core CPI 30yr spread
Source: Bloomberg Š
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Bond Buyer 40 Taxable Equivalent Yield (TEY) 30 years
Source: Bloomberg, https://www.taxpolicycenter.org/statistics/historical-highest-marginal-income-tax-rates Š
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Historical Gross Debt Outstanding
Source: Bloomberg, CBO.gov Š
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Net Interest Expense: Debt Outstanding
Source: CBO.gov Š
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Federal Deficit
Source: Bloomberg, CBO.gov Š
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Treasury Curves Post Brexit to Now
Jul. 06, 2016 Dec. 08, 2016 Nov. 08, 2018 Feb. 03, 2020
Source: Bloomberg Š
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2-yr vs. 10-yr Treasury Yields
Mid Price: 17.504 High on 12/31/19: 34.442 Average: 17.091 Low on 08/27/19: -5.331
Source: Bloomberg Š
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2-yr vs. 30-yr Treasury Yields
Mid Price: 64.928 High on 12/31/19: 81.731 Average: 62.447 Low on 08/27/19: 42.572
Source: Bloomberg Š
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Bond Buyer 40 Yield vs US Treasury 30 Yield
BBMY Index – Mid Price 2.360 GT30 Govt – Last Price 2.007
BBMY Index – GT30 Govt 0.3597
Source: Bloomberg ©
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10yr Treasury & Core CPI 1970 - 1980
Source: Bloomberg Š
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10yr Treasury & Core CPI 1980 - 2000
Source: Bloomberg Š
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10yr Treasury & Core CPI 2000 - Now
Source: Bloomberg Š
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10-yr Treasury vs. 10-yr German Bond
NIRP
GT10Y Govt Mid YTM: 1.596 GTDEM 10Y Govt Mid YTM: -0.405
Source: Bloomberg ©
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States Pension Burden Largest Burden: Moody’s Adjusted Net Pension Liability* Rating Mdy/S&P
ANPL
ANPL/Rev
Tread Water**
Illinois
Baa3/BBB-
$240 billion
505.1%
NO
Kentucky
Aa3/A
$45.9
308.7%
NO
Connecticut
A1/A
$62.1
285.8%
NO
New Jersey
A3/A-
$113.8
274.9%
NO
Least Burden North Carolina
Aaa/AAA
$9.4
31.4%
YES
Tennessee
Aaa/AAA
$6.4
32.3%
YES
North Dakota
Aa1/AA+
$1.8
32.6%
NO
New York
Aa1/AA+
$39.2
40.2%
YES
*Moody’s uses same discount rate for all pension assets and liabilities. ** Contribution to pension that keeps the ANPL flat ©
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Pension Funded Levels 2017 – State Median 56.8% Pew Charitable Trust report June 2019
©
State
Ratings Mdy/S&P
% Funded
Rank
Kentucky
Aa3/A+
33.9%
50
New Jersey
A3/A-
35.8%
49
Illinois
Baa3/BBB-
38.4%
48
Connecticut
A1/A
45.7%
47
Colorado
Aa1/AA
47.1%
46
Wisconsin
Aa1/AA
102.6
1
South Dakota
Aaa/AAA
100.1
2
Tennessee
Aaa/AAA
96.5
3
New York
Aa1/AA+
94.5
4
Idaho
Aa1/AA+
91.3
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Not Just States – Local Governments Too Largest Burden: Moody’s Adjusted Long Term Liabilities* (pension, OPEB, LTD) Cities
Rating Mdy/S&P
LT Liabilities
LT Liab/Rev
Tread Water**
Chicago
Ba1/BBB+
$51.3 billion
735%
NO
Honolulu
Aa1/AA+(Fitch)
$10.6
648%
NO
Houston
Aa3/AA
$15.1
608%
NO
Columbus
Aaa/AAA
$6.7
593%
YES
Least Burden DC
Aaa/AAA
$13.9
160%
YES
Denver
Aaa/AAA
$5.5
253%
YES
New York
Aa1/AA
$274.4
312%
YES
Philadelphia
A2/A
$14.9
328%
YES
*Moody’s uses same discount rate for all pension and OPEB assets and liabilities. ** Contributions that keeps liabilities flat ©
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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.
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