| Thursday, January 3, 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 • Gus Koppen |
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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 |
| 12/26/18 | 2.41 | 2.44 | 2.54 | 2.61 | 2.61 | 2.60 | 2.67 | 2.74 | 2.81 | 2.94 | 3.06 |
| 12/27/18 | 2.43 | 2.41 | 2.49 | 2.58 | 2.56 | 2.55 | 2.60 | 2.68 | 2.77 | 2.92 | 3.05 |
| 12/28/18 | 2.39 | 2.40 | 2.48 | 2.57 | 2.52 | 2.50 | 2.56 | 2.63 | 2.72 | 2.89 | 3.04 |
| 12/31/18 | 2.44 | 2.45 | 2.56 | 2.63 | 2.48 | 2.46 | 2.51 | 2.59 | 2.69 | 2.87 | 3.02 |
| 01/02/19 | 2.40 | 2.42 | 2.51 | 2.60 | 2.50 | 2.47 | 2.49 | 2.56 | 2.66 | 2.83 | 2.97 |
Source: U.S. Department of the Treasury, as of 01/02/2019
Where to Start to Improve Performance
Yesterday, we talked about taking portfolio losses in the beginning of the year to recover the loss in this calendar year. Many bankers agree with this concept, but then have trouble executing trades that will improve their earnings. The 1 month treasury yield is 2.35%, so if you hold bonds with yields below 2%, it may be time to do some cleanup. Given how flat the yield curve is today, it may be easier to execute profitable trades without adding too much extension.
While every portfolio is different, the best way to improve yield is to sell your lowest yielding holdings and reinvest at higher levels. To identify your lowest yielding bonds (taxable equivalent yields) you can simply filter in excel; however, it may also be nice to see a visual to get a full picture of your portfolio holdings.
In the sample portfolio below, the red line represents treasury yields while each blue dot represents a particular bond. As you can see, the sample portfolio has many holdings that could be sold and reinvested at a higher rate, even if they reinvested into treasuries.
While every portfolio is different, the best way to improve yield is to sell your lowest yielding holdings and reinvest at higher levels. To identify your lowest yielding bonds (taxable equivalent yields) you can simply filter in excel; however, it may also be nice to see a visual to get a full picture of your portfolio holdings.
In the sample portfolio below, the red line represents treasury yields while each blue dot represents a particular bond. As you can see, the sample portfolio has many holdings that could be sold and reinvested at a higher rate, even if they reinvested into treasuries.
After identifying the lowest yielding bond in the portfolio, we were able to get a bid and identify that the sale would cause the banker to recognize a loss of $21,164 dollars. While no one is ever looking to take losses, this loss could be recovered by swapping into a mortgage back security or brokered CD.
This swap provided a net overall benefit of $11,109 and the loss would be recovered in 0.92 years! If this banker had waited another week, they would not have recovered the loss this year. So do not wait, call your CCB representative and have them crunch the numbers for you on some of your lower yielding holdings.
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