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Liquidity Markets Overview


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Title: Liquidity Markets Overview

Liquidity Markets Overview
  • February 29, 2012

BofATM Global Capital Management Group, LLC (BofA
Global Capital Management) is an asset management
division of Bank of America Corporation. BofA
Global Capital Management entities furnish
investment management services and products for
institutional and individual investors. BofA
Funds are distributed by BofA Distributors, Inc.,
member FINRA and SIPC. BofA Distributors, Inc. is
part of BofA Global Capital Management and an
affiliate of Bank of America Corporation. BofA
Advisors, LLC is an SEC-registered investment
advisor and indirect, wholly owned subsidiary of
Bank of America Corporation and is part of BofA
Global Capital Management.
CSH-15/211109-0312 12/ARO4C1Q3
Macroeconomic Review Growth and Inflation
Economic and Interest Rate Review
  • The second half of 2011 was a period of expanding
    national output, with 9/30/11 GDP posting 1.8
    annualized quarter-on-quarter growth and 12/31/11
    GDP expanding at a 3.0 annualized
    quarter-on-quarter pace. As the first half of the
    year was more stagnant, year-end GDP growth, on a
    year-over-year basis, sat at 1.6, hardly robust,
    but showing positive momentum. Better second-half
    numbers should continue to exert upward pressure
    on year-on-year GDP growth for the first half of
    2012. Stagnating leading economic indicators and
    a projected slowdown of the economy in the second
    half of the year, due to both the higher costs
    associated with the implementation of Obamacare
    and the rollback of the Bush-era tax cuts, should
    serve to keep GDP growth moderate. We are
    projecting first-quarter 2012 GDP to grow at a
    slightly slower 1.5 annualized rate,
    second-quarter GDP to rebound sharply to a 2.5
    3.0 annualized rate, and then a slight slowdown
    in the second half of the year to the 2.4 2.7
  • Inflation remains benign. Year-on-year growth in
    headline CPI, the broad basket of goods and
    services used by the Bureau of Labor Statistics
    to compute consumer prices, ended 2011 at 3 and
    posted a 2.9 reading in January of this year,
    while the same measure for the same basket of
    goods, only excluding the historically more
    volatile food and energy components, grew at a
    2.2 pace by the end of 2011 and 2.3 for the 12
    months ending in January of this year. More
    broadly, commodity prices, which generally fell
    over the course of 2011, started picking up again
    late in the year, led mostly by rising oil
    prices, and this trend has extended into early
    2012. As the bulk of the worlds major economies
    are either stagnating (U.S. and Japan) or
    outright shrinking (the Eurozone as a whole), the
    future path of commodity prices will continue to
    be determined mainly by Chinas output. China is
    revising downward its projection of national
    output to a level below 8 for the first time in
    a decade.

Chart source Bloomberg as of February 29, 2012.
Past performance is no guarantee of future
Macroeconomic Review Jobs Picture
Economic and Interest Rate Review
  • With inflation in check, the dual nature of our
    Central Banks mandate is such that the Federal
    Reserve is tasked with pursuing policies that
    promote full employment. The U.S. jobs situation
    is looking better, at least on the surface, as
    the nations unemployment has fallen from its
    peak of 10.0 in October of 2009 to 8.5 at
    year-end 2011 and even further to 8.3 as of the
    end of January 2012 (8.26 on an unrounded
    basis). January 2012 saw the creation of 243,000
    jobs, per the Bureau of Labor Statistics Nonfarm
    Payroll Report, the highest level of monthly job
    creation seen since March and April 2011 and,
    before that, May 2010. A reslowing of the
    domestic economy should make job creation more
    difficult by the second half of 2012, a factor,
    along with the European financial/sovereign debt
    situation, that likely explains the Feds
    proclamation of sustained monetary accommodation
    until at least late 2014.
  • Below the surface, the employment situation is
    showing some structural difficulties. As is shown
    in the lower chart, between its peak in March
    2007 and its relative trough in December 2009,
    the economy lost most than 6 million jobs among
    those people without a college degree. From its
    relative peak in February 2008 to a trough in
    February 2009, college degreed workers lost only
    1.2 million jobs. Since these respective troughs,
    the economy has added 2.2 million jobs for the
    college degreed but only 901,000 for those
    workers who didnt graduate from
    college. Presumably, those workers without
    college degrees have been employed in the
    manufacturing and construction industries. Manufac
    turing employment in the U.S. has been falling
    for decades, as weve deindustrialized the
    nation, shipping manufacturing jobs offshore in
    search of cheap labor. Construction employment
    had always picked up the slack, providing jobs
    for undereducated workers. Since its peak in
    April 2006, the construction industries have been
    working through a glut of overbuilding. Finding
    employment for these undereducated workers will
    require a resurgence of U.S.-based manufacturing,
    a reawakening of the construction industries, or
    significant and time-consuming retraining, none
    of which appear to be quick fixes for this
    structural employment issue. This proposition is
    likely also weighing heavily on the Fed.

Chart source Bloomberg as of February 29, 2012.
Past performance is no guarantee of future
Interest Rate Environment
Economic and Interest Rate Review
  • Just as the data appeared to be looking
    bettermore robust third and fourth quarter 2011
    GDP, falling unemployment, etc.the Federal
    Reserves monetary policy-making body, the
    Federal Open Market Committee (FOMC), announced
    that it would maintain an accommodative monetary
    policy stanceit would keep rates extremely
    lowuntil late 2014. Whether this was due to the
    possibility of the domestic economy reweakening
    or the FOMCs fear of widespread uncertainty
    emanating from the Eurozone region, it is not
    clear, but the Fed appears to be firmly committed
    to keeping the front end of the yield curve at
    low levels for an extended period. To be sure, a
    more dovish set of Reserve Bank presidents have
    rotated into voting positions on the FOMC, so
    extended monetary accommodation is not a
    surprise. In fact, a poll released by the FOMC
    after its most recent meeting showed that, while
    most members believe that year-end 2014 will see
    the first increase in the Committees federal
    funds policy rate, four members dont believe it
    will happen until 2015 and a further two believe
    it will not occur until 2016.
  • With the ongoing challenges to robustly create
    jobs and the structural difficulties in the jobs
    market that point toward some stagnation, perhaps
    the biggest reason the Fed has its foot off the
    monetary brake is the financial/sovereign debt
    situation in the Eurozone. The lower chart
    displays the yield the market is commanding over
    German debt to hold the sovereign debt of the
    peripheral Eurozone members Greece, Portugal,
    Ireland, Italy, and Spain. The left-hand side of
    the chart shows what the Eurozone, operating
    under a single currency and as a single economic
    bloc, was set up to do all of the debt of the
    many Eurozone nations was trading at very similar
    yield levels. The right-hand side of the chart,
    however, shows the shortcoming of a system set up
    with seventeen nations retaining sovereignty over
    fiscal policy but operating under the monetary
    authority of a single central bank. While its
    undeniably true that Greece, Portugal and
    Ireland, in particular, have large sovereign and
    banking debt problems, it is our contention that
    the problems in the Eurozone will not be solved
    until this dichotomy of multiple fiscal policies
    trying to work in concert with a single monetary
    authority is fixed, and, until it is, fear
    stemming from bad and worsening news coming out
    of the region will likely continue to pressure
    the Fed to keep rates lower for a longer period
    of time unless domestic inflation begins to
    meaningfully rise.

Chart source Bloomberg as of February 29, 2012.
Past performance is no guarantee of future
Yield Curves
Economic and Interest Rate Review
  • Between the Eurozone crisis, the prospects for a
    reweakening of the economy domestically, two
    rounds of Federal Reserve quantitative easing
    that pumped 2.3 trillion into the markets and
    the Feds Operation Twist in the second half of
    last year whereby the Fed sold some short-term
    securities in Treasury holdings and used the
    proceeds to buy longer-term Treasury securities,
    its no surprise that the yield curve is flat and
    continues to flatten. The very front-end of the
    curve, from overnight out to two years, directly
    reflects the Feds bringing its policy rate to a
    range of 0 to 25 basis points (bp) in the wake of
    the Lehman failure in the fall of 2008, while low
    and falling rates on the long end of the curve
    reflect fear and the impact from the twist
    operation. All but the 30-year part of the term
    structure of interest rates are at or close to
    their all-time lows in terms of yield, and, as
    stated above, the Fed is looking to maintain
    these rates for an extended period.
  • The hunt for yield in the money market space
    continues, as roughly 3 trillion in assets is
    chasing paper that matures no longer than in 13
    months. Because of this, the very front-end of
    the curve is almost completely flat, with fed
    funds trading at roughly 11 bp and 1-year
    Treasury bills trading at roughly 16 bp. The
    smaller-than-usual but still meaningful pickup in
    yield going out to the 2- and 3-year parts of
    curve reflect the fact that this is a perennial
    underserved markettoo long for the money funds
    and too short for core bond managers. Given the
    outlook for sustained Fed inactivity, this part
    of the curve offers solid risk-adjusted yield
    opportunities for separate account mandates.
  • The fact that the Eurozone situation is both a
    sovereign and a financial institution issue is
    directly reflected in what had been a sustained
    creeping up of LIBOR, as that short rate contains
    a banking credit component to it. More recently,
    however, positive news out of the Eurozone,
    possibly of the nature of nothing more than
    kicking the can down the road and not
    fundamentally solving the true problem, has
    caused LIBOR rates to fall and, along with them,
    the TED spread, or the spread between LIBOR and
    U.S. bill yields. This news is welcome, as it
    reflects a diminution of fear in the market, but
    we fully expect LIBOR to remain volatile in the
    days and months ahead.

Source U.S. Treasury as of February 29, 2012
Source Bloomberg as of February 29, 2012
Past performance is no guarantee of future
Short-Term Taxable Yield
Taxable Review
  • The short end of the credit curves remains
    extremely flat and compressed. Like the Treasury
    curve, the yields of these securities have
    flattened even further during the past three
    months. All nonfinancial sectors of short-term
    high-grade corporate paper continue to trade in a
    narrow band. The financial sector, on the other
    hand, is showing often large-scale
    differentiation between certain issuers,
    reflecting investors fears of certain firms
    exposures to the Eurozone debt problems.
  • The liquidity requirements for money market funds
    that went into effect earlier last year continue
    to apply pressure on the short end of the curve
    as funds meet the 10 daily and 30 weekly
  • Another consequence of the liquidity buckets is a
    premium placed on Treasuries and discount notes,
    as both are eligible for the new 2a-7 liquidity
    buckets inside of specified maturities.
  • There continues to be minimal yield pickup
    between Treasuries and discount notes. The spread
    between the highest-rated commercial paper (CP)
    and government agencies also remains very tight.

Chart source Bloomberg as of February 29, 2012.
Past performance is no guarantee of future
Taxable Credit/Structure Spreads
Taxable Review
  • The short-term relief in Europethe staving off
    of a hard default on Greek sovereign debt and the
    European Central Banks solving the areas banks
    possible funding problemsis being felt in a
    continued tightening of spreads in non-Treasury
    fixed-income products relative to Treasury
    yields, as investors, seeking yield in the
    ultra-low-rate environment, are again flocking to
    what they, and we, consider to be possibly safer
    investments in prudently selected corporate and
    asset-backed names.
  • Spreads of short corporate paper to like-duration
    Treasury yields, or the added yield commanded by
    the market for compensation for taking on the
    additional risk, fell from its end-of-January
    level of 142 bp to its end-of-February level of
    118 bp, a 24 bp tightening, or nearly 17. Prior
    to the spread widening that began in mid-2007,
    short corporate spreads averaged roughly 55 bp,
    suggesting that further spread tightening is
    possible in this paper. Even if we do not again
    see those tighter spread levels, the additional
    yield in the portfolio from holding this type of
    investment is beneficial to the portfolio, as
    long as individual investments are wisely chosen.
  • In the asset-backed securities (ABS) space, the
    story is similar. At the end of January, spreads
    of this paper to like-duration Treasury
    securities stood at 76 bp and fell to 67 bp by
    the end of February, a 9 bp or nearly 12
    tightening. Longer-term averages, again before
    the start of spread widening associated with the
    then- upcoming credit crisis that followed the
    failure of Lehman in 2008, were roughly 55 bp,
    again suggesting the potential for further spread
    tightening. There is relatively little paper
    being issued in the short ABS space, so continued
    strong demand with little supply should lead to
    tighter spreads going forward, absent another
    credit-related shock to the system. 
  • As volatility is a measure of risk in the
    marketplace, and there is a strong correlation
    between falling volatility and residential
    mortgage-backed securities (MBS) spreads. The
    high level of fixed-income volatility stemming
    from the European situation makes, in our
    opinion, the purchase of agency-issued MBS a
    risk-efficient method of possibly adding yield to
    a short-term fixed-income portfolio. Agency-issued
    MBS carries with it the creditworthiness of
    Fannie Mae, Freddie Mac and Ginnie Mae, an
    unsurpassed liquidity profile, and additional
    yield that, in our opinion, outstrips the
    uncertainty of the timing of cash flows in the

Chart source Bloomberg as of February 29, 2012.
Past performance is no guarantee of future
Yield Curves
Tax-Exempt Review
  • SIFMA averaged 0.10 for the month of January and
    February. The SIFMA Index remains low due to a
    variety of pressures lack of new VRDN supply,
    stronger concerns over Eurozone credits creating
    stronger demand for non-Eurozone credits,
    continued government stimulus and continued
    purchasing of tax-exempt securities by taxable
    fund managers, among others.
  • January reinvest cash created strong demand from
    both taxable and tax- exempt buyers. The SIFMA
    index should begin to cheapen as cash balances
    are spent down and dealers begin carrying larger
    VRDN inventories. SIFMA should settle in around
    the 0.10 to 0.16 range in March.
  • Although yields of short-term municipal
    securities remain low, 1-year AAA-rated municipal
    notes continue to yield more than 112 of 1-year
    Treasury securities.
  • The crossover strategy remains prevalent and is
    frequently used as municipal yields remain
    attractive and will likely remain so until
    taxable rates shift higher.

Chart source Bloomberg as of February 29, 2012.
Past performance is no guarantee of future
Relative Value Yield Curve Comparison
Tax-Exempt Review
  • The 1-year municipal yield curve remains flat out
    to one year with 8 bp of steepness. Yields have
    richened in this space as a result of January
    reinvest cash, 1-month AAA-rated municipals were
    0.03 richer at 0.12 and 1-year AAA-rated
    municipals were 0.05 richer at 0.20.
  • Yields on 1-year AAA-rated municipals are 0.07
    richer at 0.18 since January.
  • Yields on 2-year AAA-rated municipals are 0.16
    richer at 0.26 since January.
  • Yields on 3-year AAA-rated municipals are 0.18
    richer at 0.42 since January.
  • Spreads between 1- and 2-year maturities are 9 bp
    tighter at 8 bp since January.
  • Spreads between 2- and 3-year maturities are 2 bp
    tighter at 16 bp since January.
  • Spreads between 1-year AAA-rated municipals and
    1-year BBB-rated municipals tightened 10 bp to
    120 bp since January.
  • Issuance has gotten off to a slow start in
    January, averaging roughly 3.025 billion per
    week in January and 5.060 billion per week in
  • Issuance should start to increase going into
    March - The first week of March produced 8.50
    billion in new issuance.
  • The Eurozone remains a concern - financials
    remain cheap to municipals in the 1- to 3-year
    space, but credit risk and volatility should be
    considered. Municipals look attractive to
    industrial corporate names in the 1- to 3-year
  • Headline pressures continue to be an area of
    concern for certain municipalities. This trend is
    expected to remain in place until the overall
    economic picture begins to brighten.
  • Keeping an eye on the political landscape - a lot
    of talk about tax reform by both parties - some
    favorable for municipal bonds and taxpayers - one
    not so favorable.

Chart source Bloomberg as of February 29, 2012.
Past performance is no guarantee of future
Money Market Fund Strategy Review
  • Government and Treasury Funds, continued
  • As a result of the influx of Treasury supply, the
    bill market curve out to 6 months was
    approximately 5 bp cheaper and 1-year bills 1 bp
    cheaper. These were the cheapest levels since
    early August 2011(debt ceiling).
  • Municipal Funds
  • During the month of February, the short-term
    yield curve (MIG1) flattened by 2 bp. The curve
    had 12 bp of steepness. One-month through 6-month
    yields were flat at 12 bp while 1-year yields
    held at 24 bp. The front end of the curve
    remained very well bid as investors remained risk
    adverse due to the uncertainty surrounding the
    Eurozone and potential bank downgrades.
  • The SIFMA index averaged 0.14 for the month, up
    7 bp from the previous months average of 0.07.
    Weekly non-AMT VRDNs traded between 12 bp and 16
    bp. As taxable funds tendered back their VRDNs at
    the beginning of the month, SIFMA increased from
    8 bp to 17 bp by mid-month. As a result, daily
    VRDNs reset as high as 12 bp during this period.
    The funds VRDN positions continued to average
    between 70 and 80 of the portfolios.
  •  Although 3-month LIBOR averaged 50 bp for the
    month, down 7 bp, tax-exempt CP continued to lose
    its attractiveness from a ratio perspective.
    One-, 2- and 3-month Tax-Exempt CP averaged 11
    bp, 12 bp and 13 bp, respectively. However, there
    continued to be strong investor demand as market
    participants continued to pay a premium to hold
    high quality pure municipal names. As
    longer-dated CP offered no relative value, we
    kept our CP rolls inside of a month as we wait
    for higher SIMFA rates to be reflected in the CP
  • The Funds WAMs averaged in the mid 30s. Given
    the current outlook on interest rates, we would
    be comfortable with the WAMs in the low/mid 40s.
    However, we continue to monitor what affect, if
    any, that sterilized QE would have on the
    municipal market.
  • Prime Funds
  • Throughout February, we continued to extend the
    maturities in our prime portfolios in order to
    lock in yield in a tightening spread environment.
    By month-end, most value had been compressed out
    of the market. For example, by late February,
    yields on Canadian and Australian bank
    investments out through 6-month maturities were
    not compelling. The WAM for Cash Reserves, Money
    Market Reserves and Global Dollar were increased
    in the 3- to 7-day range while the WAL for these
    funds were bumped 2 to 6 days longer. Given the
    pending Moodys rating downgrades of European
    banks and Global Capital Market Intermediaries,
    we plan on shortening up the weighted average
    maturity of our rated funds during March in order
    to make the funds more stress test resilient.
  • Government and Treasury Funds
  • With a combination of more cash in the markets,
    Treasury and mortgage settlements, seasonal
    increase in bill supply and better market
    sentiment, the funds added positions and extended
    WAM while increasing yield. The WAM of Government
    Reserves and Treasury Reserves was extended 8
    days and 6 days, while their weighted average
    lives were pushed out 5 days and 6 days,
    respectively. Government Plus was not extended
    due to larger-than-expected redemptions
    throughout the month. The funds continued to
    ladder 1-month through 3-month securities, as
    well as barbell the portfolios by purchasing
    Treasury and government agency obligations in the
    6-month through 12-month part of the curve.
  • Overnight general collateral rates rose sharply
    from the end of December 2011 through January
    2012 by 4 bp to 17 bp. As the outstanding supply
    of coupons 1-year or less continued to increase
    and the stock of bill outstandings continued to
    decline, coupons continued to trade at a discount
    to bills, with a gap of approximately 3 bp to 5
    bp. The Treasury also announced bill auction size
    increases on the heels of the Fed announcing they
    will keep rates exceptionally low at least
    through late 2014.

Separate Account Strategy Review
Taxable Review
  • Liquidity Focus (BofAML 90-day T-bill Index)
  • As the yield curve continues to be almost
    completely flat out to the 1-year maturity tenor,
    we focused on shorter maturities (3- and 6-month
    paper) in spread sectors, mainly CP and
    short-maturity floating rate corporates. For
    those accounts that allow its use, short
    municipal paper offered good diversification
    benefits but remains hard to find (outside the
    VRDN market), certainly at attractive yield
    levels (on a tax-adjusted basis) versus its
    taxable counterparts. It should be noted,
    however, that with rates this low and spreads
    this tight, it is becoming more and more
    difficult to find short paper that provides
    yields greater than what could be earned in money
    market funds, on a fee-adjusted basis. Where
    longer taxable exposure was needed, we preferred
    higher-quality corporate paper, as short agency
    debt spreads have strongly compressed and
    marginal added yield in lower-quality names is
    not, in our opinion, adequate compensation for
    the added risk. Here, too, tax-exempt paper
    provides solid diversification but has richened
    recently versus the taxable markets.
  • Enhanced Cash (BofAML 6-month T-bill Index)
  • The kink in the shape of the yield curve out past
    one year in both the taxable and tax-exempt
    markets remains notable and provides portfolios
    with added yield potential and better roll-down
    potential. Weve concentrated on adding paper
    here and doing so conservatively, adding longer
    paper for taxable-only accounts in the
    asset-backed sector and in higher-quality
    corporates (emphasizing hard-to-find industrial
    over financial paper for its lower-volatility
    characteristics). For portfolios allowing the
    crossover use of tax-exempt paper, weve seen the
    relative cheapness of the municipal paper
    evaporate over the past several months, but we
    continue to opportunistically buy in to that
    market on relative weakness and when paper is
    available. The other side of this strategy is to
    barbell the portfolios with shorter paper, in a
    similar fashion to what is described in the
    preceding section, to offset this preference for
    longer paper.
  • Ultra Short-Term (Citigroup 1-year Treasury Index
    linked to the BofAML 1-year T-bill Index)
  • The taxable and tax-exempt portions of the bond
    markets are retaining their relatively sharp
    upward slope past the 1-year part of the term
    structure of interest rates out to the 3- and
    5-year parts of the curve. We therefore have
    focused on taking advantage of these higher
    yields and these bonds ability to appreciate in
    price over the passing of time (rolling down the
    curve) in light of our outlook for medium-term
    Fed inactivity. After pulling in our maximum
    maturity appetite to the 2- to 2.5-year range,
    thinking the Fed may indeed start a tightening
    cycle sooner rather than later, recent
    macroeconomic weakness has allowed the U.S. to
    again go out to the 3- to 4-year part of the
    curve for those accounts that allow us that
    flexibility. As is the case in the Enhanced Cash
    portfolios, we are also focusing our longer-term
    purchasing in the Ultra Short-Term strategy in
    the high-quality and/or well-structured asset
    classes asset-backed securities, defensive,
    high-quality corporate names, and, where and when
    we can, both taxable and tax-exempt municipal
    paper. Offsetting these longer-term buys was
    short-term paper, consistent with the two
    strategies described earlier. In short, we are
    barbelling longer, defensive paper and shorter
    paper carrying appropriate levels of risk.

Separate Account Strategy Review
Tax-Exempt Review
  • Ultra Short Term
  • Three-year AAA-rated municipal bonds richened to
    a 0.42 since January, 0.18 richer. The spread
    between A/AAA municipals in the 3-year space
    tightened 12 bp since January to 0.55. The
    spread between 2-year and 3-year AAA-rated
    municipals tightened 2 bp since January to 0.16.
    Three-year AAA-rated municipals are currently
    trading at 100 of 3-year Treasuries. Yields have
    dropped due to a high level of reinvestment cash
    from January maturities and meager new issue
    supply. Yields should back up going into March as
    cash balances are reinvested and the supply
    calendar improves. Be patient with reinvesting
    cash - the lower yields and tightening of credit
    spreads that January produced can be quickly
    reversed. Corporate bonds and select ABS names
    may be a suitable alternative to municipals. With
    expectations of rates being on hold until 2014,
    our strategy remains on bonds maturing in 2.5 to
    3 years.
  • Liquidity Focus
  • The yield curve for 1-year municipals has
    continued to flatten. The January Effect has
    stretched into February as a lack of supply and a
    surplus of cash continued to apply pressure on
    yields. The 30-day visible new issuance supply
    has increased and we have seen more robust new
    issuance in late February and early March. The
    increase in supply should relieve some of the
    negative pressure on the yield curve, stabilizing
    and potentially backing up yields in March.
    One-year AAA-rated municipal bonds richened to a
    0.18 since January, 0.07 richer. The spread
    between A/AAA municipals in the 1-year space
    tightened 10 bp since January to 0.35. One-year
    AAA-rated municipals continue to be cheap at 112
    of 1-year Treasuries. With a flat yield curve and
    expectations of rates being on hold until 2014,
    our strategy remains on bonds maturing in 15 to
    18 months.
  •  Enhanced Cash
  • Two-year AAA-rated municipal bonds richened to a
    0.33 in January, 0.03 richer. The spread
    between A/AAA municipals in the 2-year space
    tightened 12 bp since January to 0.44. Two-year
    AAA-rated municipals currently trading at 87 of
    2-year Treasuries. The 2-year area of the curve
    has been very competitive as short-term investors
    looked for a little more yield opportunity,
    outside of Money Market range. Two-year
    maturities of newly issued deals have been
    heavily oversubscribed. Again, as new issuance
    increases, demand should subside and yields
    bounce back off the January and February lows.
    With expectations of rates being on hold until
    2014, our strategy remains on bonds maturing in
    1.5 to 2 years.

  • Non-Farm Payroll Change Represents total number
    of paid U.S. workers of any business, excluding
    government employees, private household
    employees, farmers, and employees of nonprofits
    that provide assistance to individuals.
  • PPI (Producer Price Index) Measures prices
    received by producers at the first commercial
  • LIBOR (London Interbank Offered Rate) The rate
    of interest at which banks borrow funds, in
    marketable sizes, from other banks in the London
    interbank market.
  • TED Spread The price difference between 3-month
    futures contracts for U.S. Treasuries and 3-month
    contracts for Eurodollars having identical
    expiration months. The TED spread can be used as
    an indicator of credit risk.
  • AAA GO Curve The curve is populated with U.S.
    municipal general obligations with an average
    rating of AAA from Moodys and SP.
  • AAA Reverse Curve The curve is populated with
    U.S. municipal bonds backed by general purpose
    revenues with an average rating of AAA by Moodys
    and SP.
  • SIFMA Index comprised of high-grade, 7-day
    tax-exempt variable-rate demand notes. Index is
    produced by Municipal Market Data.

Please read and consider the investment
objectives, risks, charges and expenses for any
fund carefully before investing. For a
prospectus, which contains this and other
important information about the fund, contact
your BofA Global Capital Management
representative or financial advisor or go to An investment in money
market mutual funds is not a bank deposit and is
not insured or guaranteed by Bank of America,
N.A. or any of its affiliates or by the Federal
Deposit Insurance Corporation or any other
government agency. Although money market mutual
funds seek to preserve the value of your
investment at 1.00 per share, it is possible to
lose money by investing in money market mutual
funds. Please see the prospectuses for a
complete discussion of the risks of investing in
money market mutual funds. The credit quality
ratings represent those of Moodys Investors
Service, Inc. (Moodys) and Standard Poors
Corporation (SP) as of the date of publication
and are subject to change. For information
regarding the methodology used to calculate the
ratings, please visit Moodys at
or SP at Investing in
fixed-income securities may involve certain
risks, including the credit quality of individual
issuers, possible prepayments, market or economic
developments, and yields and share price
fluctuations due to changes in interest rates.
When interest rates go up, bond prices typically
drop, and vice versa. Tax-exempt investing offers
current tax-exempt income, but it also involves
special risks. Single-state municipal bonds pose
additional risks due to limited geographical
diversification. Interest income from certain
tax-exempt bonds may be subject to certain state
and local taxes and, if applicable, the
alternative minimum tax. Any capital gains
distributed are taxable to the investor. Any
guarantee by the U.S. government, its agencies or
instrumentalities applies only to the payment of
principal and interest on the guaranteed security
and does not guarantee the yield or value of
that security.
Mutual funds and Separate Account Strategies have
different fee and expense structures. Limitations
and restrictions to investing in Separate Account
Strategies include higher investment limits and
net worth requirements. Separate Account
Strategies are sold exclusively through financial
advisors. Please review prospectuses or offering
documents for specific details. Since economic
and market conditions change frequently, there
can be no assurance that the trends described
here will continue or that the forecasts will
come to pass. The views and opinions expressed
are those of the portfolio managers and analysts
of the affiliated advisors of BofA Global Capital
Management, are subject to change without notice
at any time, may not come to pass and may differ
from views expressed by other BofA Global Capital
Management associates or other divisions of Bank
of America. These materials are provided for
informational purposes only and should not be
used or construed as a recommendation of any
security or sector. This information does not
constitute investment advice and is issued
without regard to specific investment objectives
or the financial situation of any particular
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