Thursday, August 10, 2017
MANAGING DIRECTOR: Scott Carrithers   PORTFOLIO SALES AND SERVICE: Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty Robert Brickson • Kevin Doyle • Lonnie Harris • Larry Russell •  Mark Tranckino • Robert Schuyler  Tom Toburen • Josh Kiefer • Nicole Burczyk • Kelley Frye • Natalie Regan • Aaron Stoffer

US Treasury Market
Date	1 mo	3 mo	6 mo	1 yr	2 yr	3 yr	5 yr	7 yr	10 yr	20 yr	30 yr
8/3/17	1.00	1.08	1.13	1.22	1.34	1.49	1.79	2.05	2.24	2.56	2.81
8/4/17	1.00	1.08	1.14	1.23	1.36	1.51	1.82	2.08	2.27	2.61	2.84
8/7/17	.99	1.02	1.14	1.22	1.36	1.52	1.81	2.07	2.26	2.60	2.84
8/8/17	1.00	1.06	1.16	1.24	1.36	1.53	1.84	2.10	2.29	2.63	2.86
8/9/17	1.01	1.06	1.15	1.21	1.33	1.50	1.81	2.06	2.24	2.59	2.82

              Source: U.S. Department of the Treasury, as of 8/09/17

A Purchase to Consider – 10yr 3% Pool

Now that we have profiled a few risky asset-backed offerings, let’s review a security that provides liquidity and has minimal extension risk.  Consider purchasing a slightly seasoned 10yr 3% coupon Fannie Mae Pool. 

Higher coupon pools will retain their value better in a rising rate environment than a lower coupon pool.  While you pay a reasonable premium, these pools are typically much cheaper than the asset-backed offerings we profiled earlier this week.  Additionally, should interest rates increase 300 basis points, the average life is expected to extend only by 0.42 given the speeds noted in the example below. 

 

If you believe interest rates may rise gradually within the next few years, this is a great bond for you to consider due to the short duration.   It is anticipated that you should receive increased payments due to the higher coupon to allow for reinvestment.

Despite bond yields being compressed, there are still great investment options available to produce income for your bank.   Please contact your investment officer to determine suitable options for your bank.  You may be surprised with the yield you can obtain without moving into extremely risky assets. 

 

This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.

•Not FDIC Insured •No Bank Guarantee •May Lose Value