THIRD QUARTER 2021

Fixed Income Quarterly

Market perspectives from the Fixed Income Solutions group

Don’t Underestimate One of Your Most Precious Resources… Time

Ongoing perfect timing of the markets is FIXED INCOME QUARTERLY CONTRIBUTING STRATEGISTS impossible, yet time is efficiently critical and absolutely irreplaceable. Don’t let irreplaceable moments vanish in pursuit DOUG DRABIK

of an expected impossible execution.

DREW O’NEIL No matter where rates are, at 10% or 1%, it is highly probable that your portfolio requires some level of principal protection. Principal protection knows no level. You cannot control interest rates but you can control how you choose to protect the assets that ROB TAYLOE you don’t want to lose. Individual bonds are a critical component of long term and long term investment strategies. Substitute investment products come with some risk trade-off which is completely ROB TRIBOLET counter-intuitive to the protection being sought. When interest rates are low, protecting your principal comes at the expense of lower levels of income. This is one of those instances IN THIS REPORT where discipline to long term thinking and benefits are fundamental to Why Interest Rates Refuse to Climb most investor’s ultimate goal of protecting what they have. It is easier (Page 2) to protect your principal than to replace it. Stay Disciplined. Stay If Interest Rate Rise, Is It Doomsday invested. Stay appropriately allocated to wealth preservation assets. For My Bonds? (Page 3) This has made income generation challenging but individual Wealth Preservation (Page 4) bonds balance growth assets as well as protect principal. Our ongoing Government Backstops… Some are mission is to discuss ways to hold on to what you’ve earned with Gone Others Persist (Page 6) analytical and sound long term thinking regarding how to invest and Keeping Cash Short but Invested retain this wealth. Portfolio optimization commands lifetime discipline (Page 8) with the use of both growth assets and individual bonds. Time is a most We Hold These Truths (Page 9) valuable resource that if lost, cannot be recovered so don’t waste or Know What You Can Own (Page 10) lose it… stay invested and appropriately allocated. Fixed Income Strategy Resources (Page 11)

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FIXED INCOME QUARTERLY THIRD QUARTER 2021

Why Interest Rates Refuse to Climb

U.S. corporations are increasing earnings as World Markets as of 8/6/21 domestic growth flourishes. An ordinary aftereffect 2-Year 5-Year 10-Year 30-Year to very positive data can be rising interest rates, yet United States 0.210 0.761 1.284 1.927 Canada 0.487 0.880 1.226 1.743 the curve continues its slow descent much to France -0.696 -0.521 -0.117 0.659 the surprise of many pundits and investors. Germany -0.758 -0.731 -0.454 -0.006 Greece -0.440 0.563 We exist in a very unique financial world contained Ireland -0.648 -0.581 -0.060 0.646 Italy -0.488 -0.090 0.576 1.599 with nearly $17 trillion in negative yielding , with Japan -0.122 -0.123 0.015 0.642 global central expanding their balance sheets Netherlands -0.790 -0.715 -0.336 0.082 (the Fed to >$8.2 trillion) and with extreme interest Spain -0.610 -0.410 0.244 1.138 Sweden -0.309 0.109 rate diversity. The Fed used to control the short end United Kingdom 0.144 0.290 0.599 0.997 of the ; however, that role has expanded as of 8/6/2021 Source: Bloomberg LP, Raymond James across the curve. The 10 year Treasury does not Demographics have absolutely nothing to do with the necessarily reflect what is going on in the economy pandemic and seem to get little attention in the press, as it once used to, but may be more indicative of yet, play such an important part for a consumer- central operations. driven economy such as the US. We have an aging The Fed appears to be in control with arguably population that has a significant number of tremendous pressure to keep interest rates low as individuals reaching retirement age daily. The climbs. The Fed has actually been significance is twofold: 1) the US population over 60 very transparent about their intentions and in the years of age holds a majority of the nation’s net worth latest FOMC release, indicated that despite and 2) the buying patterns of this age group are economic progress, they are looking for substantial significantly different versus 20-50 year olds. A progress before even beginning to talk about majority of the net worth in the US has moved to the tapering. In other words, they will continue to be savings and investing phase of life. This matters for accomodating in policy until further notice. This is a consumer-driven economy and it would be evidenced by their continued monthly $120bn in occurring whether we had a pandemic or not. open market purchases. Talk “taper” all you want, but Inflation is typically a driver to higher interest rates. recognize that it just isn’t happening yet. The ongoing debate is whether the realized pockets The Fed is just part of the story. Interest rate disparity of inflation in services, food and other products are is very real. As Europe and Asia extend their temporary or permanent. As stated above, our aging accommodative policies, global interest rates population will influence much of how the money continue to plummet. This acts as a tailwind to flows are targeted, but we will continue to monitor Treasury prices (headwind to higher rates) fostering employment, wages and expectations which will foreign demand for U.S. securities. influence how this plays out.

Central Banks, Can be inflationary Like the Fed, Print or Create Money Can grow GDP

Is not inflationary

Does not grow GDP

For illustrative purposes only.

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FIXED INCOME QUARTERLY THIRD QUARTER 2021

If Interest Rates Rise, Is It Doomsday For My Bonds? If you own fixed income and yields move higher, you 3) Reinvesting payments (cash flow) lose money, right? Sometimes, but not necessarily. provides income opportunity as it is received. It depends on the scenario. Bond prices and yields When interest rates are rising, this income move inversely. The immediate impact of higher opportunity can grow larger. When reinvesting yields is lower prices, thus an unrealized loss (paper cash flows in a rising rate environment, the loss) appears; however, a bond’s price is earnings may even exceed the original projected known. Therefore a bond held until maturity is not income (“interest-on-interest” increases over affected by all of the up and down market price time), improving the portfolio’s total return. movements during the holding period. Price Therefore rising rates do not necessarily create or movements will affect a held bond only if the bond is foster a loss. The longer an individual bond’s holding sold prior to maturity. Even without holding a bond period, the greater the potential for realizing greater until maturity, a rising rate environment does not positive returns, even in a rising rate environment. To assure a loss. illustrate this point, the chart shows the estimated

Projected Returns for 10-Year Treasuries Five Years From Now In Rising Rate Environments

1% Rise in Yields 2% Rise in Yields 5.375% 1.125% 5.375% 1.125% Coupon Coupon Coupon Coupon Treasury Treasury Treasury Treasury Price Return -15.45% -1.42% Price Return -18.85% -5.68% Coupon Return 19.57% 5.67% Coupon Return 19.57% 5.67% Reinvestment Return 0.83% 0.23% Reinvestment Return 1.39% 0.39% Total Return 4.95% 4.48% Total Return 2.11% 0.38% Sources: Direct, Raymond James. Illustrative purposes only. Total returns shown are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. The longer a bond is held, the more favorable the total returns of two 10-year Treasuries, five years following attributes deliver in a rising rate from now, but in two different rising rate scenarios. environment: Observing the principal that rising rates translate to 1) As the maturity date gets closer, the price of the lower prices, it is easy to infer that holding longer bond will gravitate towards its maturity price. term bonds in a rising interest rate environment could Even if a bond shows a large market loss today prove financially damaging. However, negative price due to rising interest rates, the loss will slowly occurrences are continually offset via a bond’s dissipate over the holding period and finally positive income generating attribute. These five year disappear at maturity if the bond is never sold. projections produce positive returns for both bonds 2) Coupons are a major driver for total returns. The and in both rising rate scenarios. longer a bond is held, the more coupon payments Individual bond’s primary objective is preserving that are made. This cash flow can eventually wealth but don’t discount the embedded earning offset and eventually overtake any negative price power that continues to benefit investors even in a movement incurred, potentially leading to a rising interest rate environment. positive total return.

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FIXED INCOME QUARTERLY THIRD QUARTER 2021

Wealth Preservation Traditional portfolio basics emphasize some ratio of 2. a known amount of wealth (money) that will versus bonds (e.g. 60% stocks & 40% bonds). be returned to you; and The basic theory behind these building blocks is that 3. a known amount of money (wealth) that you these two work together to create an will receive while your money is invested. ideal portfolio given the investor’s objectives and risk These wealth preservation qualities identify when tolerance. Stocks are generally a higher risk, higher and how much wealth is being preserved. rewarding investment which provide the investor with long-term growth potential. Bonds are generally Dividend paying stocks provide a stream of cash viewed as more stable but with less upside potential, essentially providing a Known date when Known amount of Known stream of consistent ballast for the portfolio. your w ealth w ill be w ealth that w ill be cash flow? return to you? returned to you? This idea of portfolio construction is DIVIDEND PAYING NO NO NO legitimate, but the /bond category STOCKS PACKAGED PRODUCTS names are a little too simplistic. “Bonds” NO NO NO THAT OWN BONDS is too broad of a category to base an INDIVIDUAL BONDS YES YES YES allocation on. Investment-grade bonds, Treasury bonds, high-yield bonds, non- US dollar denominated bonds, defaulted bonds, and flow to investors, but that does not make them wealth mortgage-backed bonds are all examples of preservation tools. Dividends can be reduced or cut that qualify as “bonds”, yet they all have at the discretion of the company. Equities are very different attributes that may or may not provide perpetual securities, meaning they do not have a what investors are seeking for the bond portion of maturity date. The timing of when your wealth is their portfolio. returned to you is unknown, as is the amount of wealth that is returned to you. Dividend paying stock Think about the purpose rather than product type to values fluctuate based on the time of sale and the help clarify what you’re trying to accomplish. Then price of the stock at that particular moment. Dividend find products that achieve this purpose. Instead of paying stocks can provide value and growth but lack the commonplace distinction of stocks and bonds, the characteristics to be used as substitutes to think of these categories as total return (stocks) and individual bonds or as a wealth preservation tool. wealth preservation (bonds). Packaged Products are vehicles that may contain Not all types of bonds carry the same wealth the words “fixed income” in their name, yet lack the preservation qualities. A stated maturity is among the primary characteristics that make fixed income most important characteristics for wealth unique. Most packaged products do not have a preservation, thus rendering individual bonds as one maturity date, making the point-in-time when your the most effective allocations for this purpose. Long principal is returned “unknown”. The point in time you term or perpetual maturing securities or packaged sell, much like an equity, will determine its value. The products may not be as effective or suited to stream of cash flow is also unknown, as the preserve wealth even though they are sometimes underlying basket of securities that the packaged classified as “fixed income”. product owns is constantly changing. It is The features or characteristics that help an investor commonplace for these products to quote the cash identify wealth preservations qualities are: flow that was paid out in the past, but that doesn’t reveal what is going to happen in the future. 1. a known date when your wealth will be returned to you;

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FIXED INCOME QUARTERLY THIRD QUARTER 2021

Individual Bonds are true fixed income products Individual bonds provide the investor the with known characteristics that are ideal for characteristics needed in order to preserve wealth. preserving wealth. A bond has a final maturity date That doesn’t mean that high-yield bonds, dividend and price specifying the exact date and the exact paying stocks, or products with no maturity date don’t dollar amount of wealth that will be returned to you in belong in an investor’s portfolio, it just means that the future (barring a ), regardless of market they likely shouldn’t be filling the wealth preservation activity and price movement over the life of the bond. slice of the pie. So shift your thinking away from A fixed-coupon bond also has a known stream of an allocation to stocks and bonds; start thinking cash flows. For the entire time that you own the bond, of it as having a portion allocated to total return the amount and timing of cash flow are known and and a portion allocated to wealth preservation. cannot change unless the company defaults on its debt payments.

Portfolio Construction

Wealth Preservation Individual Real Estate MLPs 10% Bonds 5% 30%

Equities Dividend 35% Paying Stock 10% High Yield Bonds 10%

Total Return For Illustrative Purposes Only

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Government Backstops – Some are Gone, Others Persist

Federal Reserve 13(3) Facilities: Outstanding Max Amt Tot Loans Authorized Outstanding ($bn) ($bn) Funding Facility* 0.0 Main Street Lending Program 600 16.2 Liquidity Facility* 0.0 Municipal Liquidity Facility 500 5.4 Paycheck Protection Program Liquidity Facility 659 90.6 Facility* 0.0 Corporate Credit Facility 750 13.6 Term Asset-Backed Securities Faciltiy 100 1.7 Sources: federalreserve.gov, Raymond James. As of 6/30/21. *Facility terminated on 3/31/21 When the pandemic created economic shutdowns in 2020, the Fed made these purchases open ended March of 2020, the Fed enacted several programs to saying it would buy securities “in the amounts stabilize the financial markets. Among them: the needed to support smooth market functioning and Main Street Lending Program (up to $600 billion), the effective transmission of monetary policy to broader Municipal Liquidity Facility (up to $500 billion), the financial conditions.” The Fed is currently buying at Paycheck Protection Program (PPP) (up to $659 least $80 billion in Treasuries and $40 billion in billion), the Corporate Credit Facility (up to $750 mortgage-backed securities monthly. In the Fed billion) and the Term Asset-Backed Securities statement on 7/28/21, the Fed pledged to continue Liquidity Facility (up to $100 billion). The total these purchases until substantial further progress is outstanding from all of these loan facilities was made on their maximum employment and price around $110 billion as of March 24, 2021. These stability goals. balances are going down as the programs expired According to the St. Louis Fed (FRED Economic from the end of March through June of this year. The Data), the Fed’s securities portfolio on the week of PPP was extensively utilized while most of the 9/4/19 was ~$3.59 trillion. Is has grown to $7.65 programs were not. However, the significance is that trillion for the week of 7/28/21. When buying whether they were utilized or not, these programs Treasuries, the Fed allocates dollars proportionally provided stability or a “safety net” for the market and to the market: 31% is for purchases inside 2.25 investors. A consequence is that the backstop years, 21% from 2.25-4.5 years, 15% from 4.5-7 facilities have been contributing factors to the years (includes new 7yr issuance), 8% from 7-10 narrowing of spreads between products possessing years, 7% from 10-22.5 years, 10% from 22.5-30 various credit levels. years and 8% in TIPS (Treasury Inflation Protected Two very active programs that have buoyed financial Securities). markets are Quantitative Easing (QE) and the What has this done to spreads in fixed income standing repurchase agreement (repo) facility. On products? A-rated 10-year spreads March 15, 2020, the Fed stated that they would had ballooned to +260bp on March 23, 2020. purchase at least $500 billion in Treasuries and $200 Government intervention is highly responsible for billion in mortgage backed securities. On March 23,

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9,000,000 Securities Held Outright - U.S. $ millions 8,000,000

7,000,000 Treasury 6,000,000 Federal Agency Mortgage-Backed 5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0

Sources: Board of Governors of the Federal Reserve System, Raymond James this spread plummeting to +72bp on August 4, 2021. The standing repo facility allows firms to borrow BBB-rated 10 year corporate bond spreads have overnight at 25 basis points by using collateral or responded similarly (+337bp March 23, 2020, to pledging Treasury, agency or agency mortgage- +107bp August 4, 2021) as have 10-year AAA- backed debt. This facility is typically not necessary yields (365% yield as percent of 10yr during normal times; however, this market got out of Treasury on March 23, 2020, to 71% on August 4, synch in September 2019, driving overnight lending

A-rated 10y Corp AAA-r ate d High Yield Index Spread to BBB-rated 10y Corp 10y Muni Yield as Spread to Treasury Spread to Treasury % of Treasury Treasury S&P 500 March 23, 2020 +260 +337 365% +1088 2,237 August 4, 2021 +72 +107 71% +283 4,403 Sources: Bloomberg LP, Raymond James 2021). By comparison, the S&P 500 moved from costs to ~10%, thus facilitating a more permanent 2,237 on March 23, 2020, to 4,403 on August 4, solution. 2021. The Fed purchases have not only stabilized This brings up the question of what to do with your markets but have propelled them to regularly reach fixed income allocation. Each client should stick to new daily highs. Increasing jobless claims and an their game plan and not reach for yield by increasing elevated unemployment rate are likely to keep the duration more than they are comfortable with. Also, Fed actively purchasing. All of these asset classes do not reach for yield by purchasing lesser credit can continue to thrive as long as this pace of buying quality. continues from the Fed.

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FIXED INCOME QUARTERLY THIRD QUARTER 2021

Keeping Cash Short but Invested Every investor has unique needs. 22% tax bracket would benefit with greater net yield The currently low interest rate by selecting a corporate bond ladder versus a tax- environment has some investors exempt municipal ladder. The after-tax yield for an “wanting” to stay short which may investor in the 37% federal tax bracket might be be approached differently from investors “needing” to indifferent between taxable and tax-exempt as both be short. after tax yields are nearly identical. Certificates of Deposit (brokered FDIC insured CDs) also offer Investors needing to stay short may include those competitive yields. with upcoming cash needs for taxes, purchasing a home, paying a tuition, etc. For those investors, there For investors wanting to stay short or simply not is little choice but to earn the few basis points in yield knowing what to do in this low rate environment, the market is providing. exploring nominal duration extension may provide considerable income benefits. To illustrate, this However, for investors wanting to stay short, exploring various options may prove to be a healthy Tax Exempt 22% Federal Tax Corporate financial decision. Municipal Bracket Bond Ladder Proposal There is not a universal definition for a short maturity YTW 1.27% 0.64% ladder, therefore we will demonstrate a one-to-three After Tax TYW 0.99% 0.64% year ladder. The idea is to frame a hypothetical Duration 4.08 4.33 Avg credit rating BBB AA portfolio highlighting the consequences for investors Tax Exempt in two different tax brackets. 37% Federal Tax Corporate Municipal Bracket Bond Ladder Your tax bracket may alter your choice even when Proposal you need to stay short. Regardless of your marginal YTW 1.27% 0.64% After Tax TYW 0.80% 0.64% tax bracket, market conditions may dictate whether Duration 4.08 4.33 income is optimized using tax-exempt securities or Avg credit rating BBB AA taxable securities. In this example, an investor in the Charts created for illustrative purposes only. Calculations via Portfolio Solutions.

Tax Exempt 22% Federal Tax Brokered CD Corporate portfolio depicts a three-to-six year ladder for Municipal Bracket Ladder Bond Ladder both a tax-exempt municipal ladder and Ladder YTW 0.42% 0.60% 0.38% corporate bond ladder. The modest duration After-Tax TYW 0.33% 0.47% 0.38% extension can double the income output of the Duration 1.99 1.86 1.93 shorter laddered approach. Avg credit rating FDIC Insured BBB AA- Take-away: Modest extension, even in a low rate Tax Exempt 37% Federal Tax Brokered CD Corporate Municipal environment, might make financial sense. Many Bracket Ladder Bond Ladder Ladder projections are calling for rates to stay low for a YTW 0.42% 0.60% 0.38% long time playing into a modest extension where After Tax TYW 0.26% 0.38% 0.38% the yield curve is the steepest. Also, keeping Duration 1.99 1.86 1.93 flexible as to taxable or tax-exempt alternatives, Avg credit rating FDIC Insured BBB AA- Charts created for illustrative purposes only. Calculations via regardless of tax brackets, may improve on short Portfolio Solutions. term investment returns.

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We Hold These Truths… The Fixed Income Solution’s team boasts several subdivisions, one of which is the High Net Worth group. Ted Ruddock authored an article in our Municipal Bond Investor Weekly that contained some important truths or myth busters well worth printing again. If you are not receiving the Municipal Bond Investor Weekly or the Commentary (also a weekly publication) and would like to, please let your advisor know and we can make it happen. As for Ted’s truths… well they speak for themselves:

1. Wealth preservation assets are not risk assets (like equities). 2. Wealth preservation assets are meant to keep you wealthy, not make you wealthy. 3. Wealth preservation assets generate reliable, tax efficient income that is known in advance, not something that you hope will appear. 4. Wealth preservation assets will not be down 30% in value at redemption or maturity: par is par. (Our required disclosure: return of principal and interest on time are not guaranteed and are subject to the financial integrity of the . For investment grade municipal bonds, the probability of an issuer default over a typical ten year holding period is less than about 1/10 of 1%. [Moody’s annual default study]) Equity prices and dividends are not guaranteed either. 5. All yields are not created equal --- investors need to know the differences. 6. Investors don’t lose money buying premium coupon bonds. 7. A portfolio of individual bonds is not the same risk as a portfolio of bond funds / ETFs / packaged bond products, structured notes. 8. In a traditional buy-monitor-hold strategy, owning individual bonds by paying a commission is typically more advantageous than paying an annual fee in a managed account --- frequently, it’s 50% less costly. 9. The client should be in control. 10. The client’s best interest should come first.

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Know What You Can Own Most individual bonds provide investors with a few  Identify acceptable risk factors. prominent features that are difficult to find in other  Define desired income. product types, most notably: known cash flow for the  Create required cash flow. life of the , known income (yield) at the time of purchase, and a known date when principal will be  Identify requisite redemption period. returned. While most individual bonds provide these  Create needed liquidity. benefits to investors, there are many types of  Isolate personal biases. individual bonds, each having different features and  applications within a portfolio. As an investor, Use appropriate asset mix. sometimes it’s difficult to know which product is most  Diversify. appropriate for a particular situation. Below are listed  Rebalance when applicable. attributes that may illustrate how various products might work within a portfolio.

Product Attributes How does this fit? Additional Considerations Can I benefit from the state tax Although is minimal, Minimal credit risk. State and exemption? Am I seeking safety Treasury market risk increases with local tax exempt. and liquidity over maximizing lengthening maturity. yield? $250,000 per issuer per tax ID Do I need higher safety of Certificates of maximum size for insurance. FDIC insured. Ability to diversify principal? Typically more Deposit Sales prior to maturity subject with multiple . attractive yield versus Brokered to interest rate risk and liquidity Treasuries. risk. Diversification can be attainable The higher the tax bracket, the yet the liquidity is lesser versus Tax exempt income with Municipal Tax- greater the tax benefit. The high other alternatives due to limited favorable long term credit exempt credit quality is often viewed issue sizes. Subject to credit standing. favorably. and interest rate risk.

High credit quality alternative Diversification can be attainable taxable investment. Investors in yet the liquidity is lesser versus a lower tax bracket not Municipal other alternatives due to limited High quality, taxable alternative. benefitting from tax-exemption Taxable issue sizes. Subject to credit but still seeking the high quality and interest rate risk. and diversification offered by municipal bonds. The breadth of the corporate Wide range of issuers with market can allow for extensive various degrees of credit risk. Investment diversification from credit ratings High quality, relatively good Credit risks can fluctuate during Grade to multiple sectors. Generally liquidity and competitive yields. holding period although this will Corporates liquid. Flexibility to create not alter designated cash flow, desired cash flow and income income or redemption periods. levels. Preferred's are subordinate to debt securities but placed This may benefit the portfolio as ahead of in the Appeal to investors seeking Preferred a higher yielding component with corporate structure. Being higher yields and/or high cash Securities more risk versus true fixed perpetual or very long dated flow income alternatives. exposes them to increased price volatility. Not a hold-to- maturity alternative.

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FIXED INCOME QUARTERLY THIRD QUARTER 2021

Fixed Income Strategy Resources Doug Drabik - Sr. Fixed Income Strategist Investment Types/Expertise Include Drew O’Neil - Fixed Income Strategist . Treasuries/Agencies Rob Tayloe - Fixed Income Strategist . Brokered CDs Rob Tribolet – Fixed Income Strategist . Corporate bonds The Fixed Income Strategy Group provides market . MBS/CMOs commentary, portfolio analysis and strategy to . Tax-exempt municipals Raymond James financial advisors for the benefit . Taxable municipal bonds of their clients and prospects. We are part of the . Preferred securities larger 14-person Fixed Income Solutions group within the Raymond James’ Fixed Income Capital Markets Group’s 39 fixed income locations with more than 450 fixed income professionals including trading and specialists nationwide. This publication does not constitute Fixed Income research, but rather it represents commentary from a trading perspective. RaymondJames.com is a vast resource for those seeking fixed income market commentaries, strategies, education materials and index/yield data. Please visit our Bond Market Commentary and Analysis at www.raymondjames.com for popular and timely resources including:

. Weekly Bond Market Commentary . Fixed Income Weekly Primer (PDF) . Municipal Bond Investor Weekly (PDF) . Fixed Income Quarterly (PDF) . Weekly Index Monitor (PDF) . Weekly Interest Rate Monitor (PDF)

. Fixed Income Introduction to ESG Investing

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FIXED INCOME QUARTERLY THIRD QUARTER 2021

Duration is the measure of a bond’s price sensitivity relative to interest rate fluctuations.

Diversification and strategic asset allocation do not ensure a profit or protect against a loss. Investments are subject to market risk, including possible loss of principal. The process of rebalancing may carry tax consequences.

Any opinions expressed are those of the author(s) and not necessarily those of Raymond James, and are subject to change without notice. Past performance is no assurance of future results.

U.S. Treasury securities are guaranteed by the U.S. government and, if held to maturity, generally offer a fixed rate of return and guaranteed principal value. Fixed-income securities (or “bonds”) are exposed to various risks including but not limited to credit (risk of default or principal and interest payments), market and liquidity, interest rate, reinvestment, legislative (changes to the tax code), and call risks. There is an inverse relationship between interest rate movements and fixed income prices. Generally, when interest rates rise, fixed income prices fall and when interest rates fall, fixed income prices generally rise. Short-term bonds with maturities of three years or less will generally have lower yields than long term bonds which are more susceptible to interest rate risk. Credit risk includes the creditworthiness of the issuer or insurer, and possible prepayments of principal and interest. Bonds may receive credit ratings from a number of agencies however, Standard & Poor's ratings range from AAA to D, with any bond with a rating BBB or higher considered to be investment grade. Individual investor's results will vary. A credit rating of a security is not a recommendation to buy, sell or hold securities and may be subject to review, revisions, suspension, reduction or withdrawal at any time by the assigning rating agency.

Prior to transacting in any security, ple ase discuss the suitability, potential returns, and associated risks of the transactions(s) with your Raymond James Financial Advisor.

The value of fixed income securities fluctuates and investors may receive more or less than their original investments if sold prior to maturity. Bonds are subject to price change and availability. Investments in debt securities involve a variety of risks, including credit risk, interest rate risk, and . Investments in debt securities rated below investment grade (commonly referred to as “junk bonds”) may be subject to greater levels of credit and liquidity risk than investments in investment grade securities. Investors who own fixed income securities should be aware of the relationship between interest rates and the price of those securities.

The information contained herein has been prepared from sources believed reliable but is not guaranteed by Raymond James & Associates, Inc. (RJA) and is not a complete summary or statement of all available data, nor is it to be construed as an offer to buy or sell any securities referred to herein. Securities identified herein are subject to availability and changes in pri ce. All prices and/or yields are indications for informational purposes only. Additional information is available upon request.

While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, or state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax.

Investment products are: not deposits, not FDIC/NCUA insured, not insured by any government agency, not bank guaranteed, subject to risk and may lose value.

New issues are offered by Official Statement only, which describes the security for such issue and which may be obtained in any state in which the undersigned may lawfully offer such issue.

Bloomberg Benchmark Magenta Line™ is provided by Bloomberg Professional service and is owned and distributed by Bloomberg Finance L.P. and its affiliates.

Investing involves risk and you may incur a profit or loss regardless of the strategy selected. Sustainable/Socially Responsible Investing (SRI) considers qualitative environmental, social and corporate governance, also known as ESG criteria, which may be subjective in nature. There are additional risks associated with Sustainable/Socially Responsible Investing (SRI), including limited diversification and the potential for increased volatility. There is no guarantee that SRI products or strategies will produce returns similar to . Because SRI criteria exclude certain securities/products for non-financial reasons, utilizing an SRI investment strategy may result in investment returns that may be lower or higher than if decisions were based solely on investment considerations.

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