| Thursday, August 15, 2019 |
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|---|---|---|---|---|---|---|---|---|
| MANAGING DIRECTOR: Scott Carrithers PORTFOLIO SALES AND SERVICE: Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty Kevin Doyle • Lonnie Harris • Mark Tranckino • Robert Schuyler • Tom Toburen • Josh Kiefer Nicole Burczyk • Kelley Frye • Natalie Regan • Aaron Stoffer • Chuck Honeywell |
| 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 |
| 08/08/19 | 2.09 | 2.02 | 1.96 | 1.79 | 1.62 | 1.54 | 1.54 | 1.62 | 1.72 | 2.02 | 2.25 |
| 08/09/19 | 2.05 | 2.00 | 1.95 | 1.78 | 1.63 | 1.58 | 1.57 | 1.65 | 1.74 | 2.03 | 2.26 |
| 08/12/19 | 2.09 | 2.00 | 1.94 | 1.75 | 1.58 | 1.51 | 1.49 | 1.56 | 1.65 | 1.92 | 2.14 |
| 08/13/19 | 2.05 | 2.00 | 1.96 | 1.86 | 1.66 | 1.60 | 1.57 | 1.62 | 1.68 | 1.94 | 2.15 |
| 08/14/19 | 1.98 | 1.96 | 1.92 | 1.79 | 1.58 | 1.53 | 1.51 | 1.55 | 1.59 | 1.84 | 2.03 |
History Does not Repeat Itself but it often Ryhmes
A favorite economic indicator used by many in the financial markets is the 2/10 UST spread which, when it inverts, usually foretells a recession. Yesterday the 2/10 spread inverted which implies a high probability of a future recession. While you can’t say with a 100% confidence a recession is going to happen, the risks are near the highest since the great recession.
Source: Bloomberg L.P.
Source: Bloomberg L.P.
So what should you do if you think a recession is likely?
- Avoid long term fixed funding. Issue callable CDs or a mix of callable CDs and overnight advances.
- Avoid rose colored glasses. Your loan demand will probably not be as strong as anticipated.
- Prepare for a refi wave of your fixed rate loans.
- Extend duration on your securities purchases. While rates may be lower today than 3 months ago, they are likely going lower.
Source: Bloomberg L.P. & FFIEC
Source: Bloomberg L.P. and FFIEC
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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