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OUTLOOK 2023 BONDS Sec. Uncovering alternatives in the bond market cross the Treasury interest rates, 2022 was a year of an important buyer of U.S. Treasuries. yield curve, U.S. steeply higher rates. So where do we Higher foreign market yields, all else A Treasury yields think the yield on the 10-year Treasury equal, generally dissuade foreign were significantly security is headed in 2023? investment into our markets. There higher in 2022 with The path of interest rates will are a range of scenarios we think shorter maturity securities higher by certainly be largely influenced by the could play out over the next year. 4%. Additionally, intermediate- and Fed’s behavior, which will be guided However, given our view that the longer-term Treasury yields were by economic growth and inflation U.S. economy could eke out slightly higher by over 2%, taking the 10-year data. Equally important is the level positive economic growth next year, Treasury yield to the highest levels of non-U.S. developed government we think 10-year Treasury yields could since 2007. After years of falling bond yields, as foreign investors are end the year around 3.5% [Fig. 9]. Treasury yield forecasts fig. Hard landing Flattish growth/ Stagflationary environment mild recession Economic growth contracts Economic growth slows Economic growth slows but still slightly positive but still positive Inflation expectations decline Inflation expectations Inflation expectations increase 9 Macro steady and falling conditions Fed cuts rates from Fed cuts rates but Fed hikes rate into restrictive levels still restrictive more restrictive territory Global government Global government Global government bond yields fall bond yields steady bond yields elevated Year-end Fed Funds Rate 2.00% 4.50% 5.50% Market-Implied Inflation 2.00% 2.50% 3.50% Expectations 2-Year Treasury Yield 2.00% 3.75% 5.00% 10-Year Global Bond Yields 1.00% 2.00% 3.00% 10-Year Treasury Yield 2.75% 3.25 – 3.75% 4.75% Source: LPL Research 11/15/22 Rate forecasts may not develop as predicted and are subject to change. 10

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