Short Bullet Structure, With More Yield?

Brokered CDS are a way for community banks to raise additional funding, but they could also be a viable investment option within the banks portfolio.  Brokered CDS are typically issued at par, but are also often available on the secondary market.   This may be a good segment to consider including if you are looking to maintain investment in a fixed rate and non-callable “vanilla” structure, but also looking to boost portfolio yield. 

The below chart compares a new issue CD to both a callable agency and a bullet agency of a similar maturity.  As you can see, there is potential to increase yield in the portfolio by investment in a cd over the agency offerings.  You pick up 21 basis points, on a four-year investment above the agency bullet and 7 basis points above the callable agency. 
 

These investments are typically FDIC insured to $250,000.   Thus, if you are looking to allocate a large portion of your portfolio into this sector, it may take time to build a laddered structure of unique issuers.  If you have questions about adding CDS into your portfolio or how to issue CDS to raise funding for your bank call your CCB representative to review in more detail.