Economic Calendar. Time CST Release Period

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1 Desk Commentary Fixed Income & Currencies Municipal Products Municipal Markets Weekly Update Market News Despite continuing geopolitical uncertainty, equity markets managed to post consistent gains throughout the trading week while fixed income rates generally moved higher. A shortage of economic statistics added to the sense of uncertainty in fixed income markets, and the figures that were released last week were mixed. Municipals, however, bucked this trend, ending the week with rates steady to slightly lower, thanks to a light new issue calendar and heavy demand in the short to intermediate ranges. This week s municipal new issue calendar is expected to be moderate once again at $5.2 billion. January 22, 2019 Municipal Desk Analyst Chris Mauro chris.mauro@rbccm.com Municipal Syndicate Desk Municipal Sales Last week s economic calendar was abbreviated due to the federal government shutdown as the scheduled reports on December retail sales and housing starts were Municipal Trading not released by the US Census Bureau. However, the US Bureau of Labor Statistics released the final read of the December Producer Price Index (PPI) on Tuesday. The index came in weaker than expected with core PPI down 0.1% m/m compared to the Bloomberg Survey estimate of 0.2%. The Federal Reserve s report of December industrial production was mixed, increasing 0.3% from a downwardly revised prior month. However, manufacturing production was up 1.1% m/m, well in excess of market expectations of a 0.3% gain. Regional economic readings were also mixed, with the Federal Reserve Bank of New York s Empire index coming in well below market expectations and Philadelphia Federal Reserve s Business Outlook Index exceeding them. Finally, the National Association of Home Builders January sentiment index on was somewhat better than forecast while the University of Michigan s preliminary read of its January Consumer Sentiment Index fell to 90.7 from December s This week s holiday shortened economic calendar will again be impacted by the federal government shutdown as the US Census Bureau reports on December durable goods orders and new home sales will likely not be released as scheduled. However, the National Association of Realtors will release its reading on December existing home sales on Tuesday and the Federal Housing Finance Agency is scheduled to release its House Price Index for November on Wednesday. Additionally, The Conference Board will release its Leading Economic Index for December on Thursday. The Bloomberg Survey projects a 0.1% m/m decline in the index. Finally, regional economic reports are due from the Richmond and Kansas City Federal Reserve Banks. Monday Tuesday Wednesday Date Economic Calendar Time CST Release Period Survey Actual Prior 01/22/19 10:00 Existing Home Sales MoM Dec -0.9% % -- 01/22/19 10:00 Existing Home Sales Dec 5.27m m -- 01/23/19 7:00 MBA Mortgage Applications 18-Jan % -- 01/23/19 9:00 FHFA House Price Index MoM Nov % -- 01/23/19 10:00 Richmond Fed Manufact. Index Jan Revision of Prior

2 Thursday 01/24/19 8:30 Initial Jobless Claims 19-Jan k -- 01/24/19 8:30 Continuing Claims 12-Jan k -- 01/24/19 9:45 Bloomberg Consumer Comfort 20-Jan /24/19 9:45 Markit US Composite PMI Jan P /24/19 9:45 Markit US Manufacturing PMI Jan P /24/19 9:45 Markit US Services PMI Jan P /24/19 10:00 Leading Index Dec -0.1% % -- 01/24/19 11:00 Kansas City Fed Manf. Activity Jan Friday 01/25/19 8:30 Durable Goods Orders Dec P /25/19 8:30 Durables Ex Transportation Dec P /25/19 8:30 Cap Goods Orders Nondef Ex Air Dec P /25/19 8:30 Cap Goods Ship Nondef Ex Air Dec P /25/19 10:00 New Home Sales Dec /25/19 10:00 New Home Sales MoM Dec Source: Bloomberg Rate Watch Short-Term Market Treasuries Long-Term Market Current* Previous Current Previous Current Previous SIFMA Index (BMA) 1.28% 1.39% 1.41% 5 Year Treasury 2.62% 2.53% 2.76% AAA MMD (5Y) 1.83% 1.85% 2.04% 1 Month ICE LIBOR 2.51% 2.51% 2.07% 10 Year Treasury 2.79% 2.70% 2.92% AAA MMD (10Y) 2.21% 2.21% 2.47% 2 Month ICE LIBOR 2.63% 2.65% 2.18% 20 Year Treasury 2.95% 2.87% 3.02% AAA MMD (20Y) 2.90% 2.87% 2.94% SIFMA/ 1M ICE LIBOR 51.08% 55.40% 68.41% 30 Year Treasury 3.10% 3.03% 3.12% AAA MMD (30Y) 3.06% 3.03% 3.07% Fed Funds Target 2.50% 2.50% BAA MMD (20Y) 3.76% 3.73% 3.79% * Current is 01/18/19 EOD and Previous is 01/11/19 EOD AAA MMD/UST Ratios Current* Previous Other Markets Current* Previous 5 Year 69.74% 73.14% 74.16% S&P 500 Index 2, , , Year 75.04% 76.96% 81.86% Nasdaq Index 7, , , Year 98.47% 99.95% 97.39% Gold 1, , , Year 98.77% 99.89% 98.34% Oil

3 Long Term Market Fixed income rates drifted higher last week as equity prices posted five consecutive trading days of increases. Municipals outperformed Treasuries as a significant amount of new investor cash, particularly in the short to intermediate range, met a modest new issue calendar. As a result, municipal/treasury yield ratios in the intermediate range fell to multi-year lows by Friday s close. By the end of the week, US Treasuries were nine basis points higher in the five year and ten year ranges and seven basis points higher in the thirty year range. The Municipal Market Data AAA yield closed the week two basis point lower in the two and five year ranges, unchanged in the ten year range and three basis points higher in the thirty year range. Municipal/Treasury yield ratios fell sharply on the week, closing approximately three percentage points lower in the short to intermediate ranges and over one percentage point lower in the thirty year range. Ratio of 10-Year AAA MMD to 10-Year Treasury 110% 105% 100% 95% 90% 85% 80% 75% 1/19/ 16 7/19/16 1/19/17 7/19/17 1/19/ 18 7/19/ Yr MMD vs TSY 5Yr Avg Ratio Short Term Market Short-term tax exempt rates were mixed last week as demand fell and dealer inventories increased. Daily rates moved higher after two weeks of declines, with the bulk of the gains posted on Friday. The general market high grade daily average closed the week at a rate of 0.92% compared to the 0.81% closing rate on the previous Friday. Conversely, weekly rates fell sharply last week again last week, moving the daily and weekly rates closer together. The SIFMA index reset at 1.28% on January 16, 2019, eleven basis points lower than the 1.39% rate posted on January 9, 2019 and the recent high of 1.71% set on December 26, Tax-exempt money market funds (TEMM) saw their first week of outflows since October 31, According to the Lipper US Fund Flows service, TEMMs reported $1.24 billion in net outflows for the week ended January 16, 2019 after reporting $216 million in net inflows in the prior week. Ratio of SIFMA Index to 1-Month ICE LIBOR 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 1/19/16 7/19/16 1/19/17 7/19/17 1/19/18 7/19/18 SIFMA/1M ICE LIBOR 5Yr Avg Ratio

4 Municipal Market Volume Last week s $7 billion in issuance put municipal market volume for the first half of January at approximately $15 billion. The calendar for the remainder of the month looks to be on the lighter side with this week s holiday-shortened issuance expected to total only $5.2 billion. Additionally, the FOMC meeting in the final week of the month is expected to dampen issuance in that week as well. Nevertheless, it appears that issuance for the month will likely approach the ten year average for January of $24 billion and should exceed the $21.5 billion issued in January ,000 New Money Refunding Combined 10yr MMD 3.00% 12,000 10, % $ in millions 8,000 6,000 4,000 2, % 2.25% 2.00% Weekly Average 10-yr MMD % Source: Securities Data Corporation, Municipal Market Data Municipal Fund Flows Municipal bond funds that report their flows on a weekly basis reported their second consecutive week of sizable inflows. The weekly reporting funds posted net inflows of $946 million in the week ended January 16, 2019 compared to the $1.55 billion in net inflows reported in the prior week according to the Lipper US Fund Flows service. Intermediate and high yield municipal funds accounted for the majority of the flows in the municipal fund sector. For the second consecutive week, the inflows reported by short municipal bond funds were lower but remained in positive territory. Again, it is not unusual to see significant municipal fund inflows in the first few weeks of January. It will take a few more week to determine whether or not a consistent trend of inflows has developed. Lipper Municipal Fund Flows $3,000 Weekly Fund Flow 4-Wk Moving Avg Fund Flow Change (US$MM) $1,000 ($1,000) ($3,000) ($5,000) Jan-14 Apr-14 Aug-14 Dec-14 Mar-15 Jul-15 Nov-15 Feb-16 Jun-16 Oct-16 Jan-17 May-17 Sep-17 Dec-17 Apr-18 Aug-18 Nov-18 Source: Lipper US Fund Flows

5 RBC New Issue Calendar Pricing Date 01/22/19 9,745 RBC Capital Markets - Long Term - Forward Calendar - Senior Managed Deals* Par Amt (000s) Description State Susquehanna Township School District, Dauphin County, General Obligation Bonds-Series 2019 Maturity RBC Role Type Moody's S&P PA SOM BQ Aa2 Fitch Insurer/ Enhancement 01/23/19 2,000 Guerneville School District General Obligation Bonds, Election Of 2016, Series B CA 2020,32,37,41,44, 48 SOM BQ AA- 01/23/19 216,640 Iowa Finance Authority State Revolving Fund Revenue Bonds (Green Bonds)-Series 2019 A IA ,42 SR-MGR REV Aaa AAA AAA 01/23/19 42,150 01/23/19 10,000 01/23/19 4,500 01/24/19 16,000 Iowa Finance Authority State Revolving Fund Revenue Bonds (Green Bonds)-Series 2019 B (Taxable) Lancaster School District, Lancaster County, General Obligation Bonds-Series 2019 Southern Public Power District Electric System Revenue Bonds-Series 2019 Cloverdale Unified School District General Obligation Bonds, Election Of 2018Series A IA SR-MGR REV Aaa AAA AAA PA SOM BQ AA(A+) MAC NE SOM BQ AA- CA ,48 SOM GO Aa3 01/24/19 198,980 County Of Miami, Ohio Hospital Facilities Improvement And Refunding Revenue Bonds (Kettering Health Network Obligated Group Project)- Series 2019 OH ,49 SR-MGR HEALTH A2 A+ 01/24/19 4,000 Imperial Unified School District General Obligation Bonds, Election Of 2016, Series C CA TBD SOM BQ AA(A+) MAC 01/24/19 48,910 Indiana Housing And Community Development Authority Single Family Mortgage Revenue Bonds - Series 2019 A IN ,39,43 48 PAC SR-MGR HSG Aaa AAA Source: RBC Capital Markets; Preliminary, subject to change This communication is not a research report or a product of RBC Capital Markets' Research Department. This communication is intended for institutional investors and may not be independent of RBC Capital Markets proprietary interests. RBC Capital Markets may trade the securities discussed in this communication for its own account and on a discretionary basis on behalf of certain clients. Source: US Bureau of Labor Statistics, National Association of Home Builders, Federal Reserve System, Federal Reserve Bank of New York, Philadelphia Federal Reserve, University of Michigan, The Bond Buyer, Securities Data, Lipper US Fund Flows, Bloomberg. Preliminary, subject to change. This announcement is not an offer, solicitation, commitment or recommendation to buy or sell the bonds and does not purport to be a complete statement of all material facts relating to the bonds. The offering is made only by means of the Official Statement, copies of which may be obtained from RBC Capital Markets. 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