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Tuesday, August 7, 2018 |
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MANAGING DIRECTOR: |
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US Treasury Market |
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| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 7/31/18 | 1.94 | 2.03 | 2.21 | 2.44 | 2.67 | 2.77 | 2.85 | 2.92 | 2.96 | 3.03 | 3.08 |
| 8/1/18 | 1.93 | 2.03 | 2.22 | 2.45 | 2.67 | 2.78 | 2.87 | 2.96 | 3.00 | 3.07 | 3.13 |
| 8/2/18 | 1.89 | 2.02 | 2.22 | 2.45 | 2.66 | 2.76 | 2.85 | 2.93 | 2.98 | 3.06 | 3.12 |
| 8/3/18 | 1.90 | 2.01 | 2.23 | 2.43 | 2.63 | 2.74 | 2.82 | 2.91 | 2.95 | 3.03 | 3.09 |
| 8/6/18 | 1.92 | 2.05 | 2.23 | 2.44 | 2.64 | 2.73 | 2.80 | 2.89 | 2.94 | 3.02 | 3.08 |
Source: U.S. Department of the Treasury, as of 08/06/2018
A Credit Ratings Refresher
Most issuers seeking to market their debt broadly will apply for and (usually) get a credit rating from at least one of the Nationally Recognized Statistical Ratings Organizations (NRSRO). Those firms include Moody’s, Standard and Poor’s and Fitch.
Overall the rating agencies use some form of a range from “triple A” (top credit rating) through “junk” and down to “default”. The following table shows the comparable investment grade ratings of the three major rating agencies:
Source: Wikipedia.org
Underwriters and traders use ratings (and other factors) to price municipal bonds. Generally nominal yield from “triple A” issuers will be the least as these issuers present the least amount of credit risk. Commensurately, the lower you go on the ratings scale, the more you would expect in terms of nominal yield.
The assembled yield curves below show the general relationship among various credit categories – investment grade and higher. Obviously, the higher the credit the lower the yield. In building a municipal bond portfolio investors need to determine which is most important: credit quality or nominal yield. Most managers try to achieve an appropriate combination of both.
When done well, sleep and earnings come easy. When done poorly, fret and losses are your companions.
Please call your CCB Capital Markets representative to assist in achieving a good night’s sleep.
Source: Bloomberg 08/06/18
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.
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