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Wednesday, August 1, 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 |
| 7/25/18 | 1.90 | 2.01 | 2.20 | 2.42 | 2.66 | 2.74 | 2.82 | 2.90 | 2.94 | 3.00 | 3.06 |
| 7/26/18 | 1.89 | 1.99 | 2.19 | 2.41 | 2.69 | 2.78 | 2.86 | 2.95 | 2.98 | 3.05 | 3.10 |
| 7/27/18 | 1.90 | 2.00 | 2.20 | 2.43 | 2.67 | 2.76 | 2.84 | 2.92 | 2.96 | 3.03 | 3.09 |
| 7/30/18 | 1.91 | 2.04 | 2.21 | 2.43 | 2.66 | 2.77 | 2.85 | 2.94 | 2.98 | 3.05 | 3.11 |
| 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 |
Source: U.S. Department of the Treasury, as of 07/31/2018
A Nice Bullet Option
Agency bullet bonds have been a valued option for institutions for many years. They are both high quality and liquid. There is another option for your portfolio that shares similar characteristics with a relatively small call risk, an agency callable bond. The coupon is much lower than current market and the current price is lower than par. With a discounted price and the general view that market yield will continue to rise, there is a strong belief that discounted callables will go to maturity.
In the chart below you will find an example of market offerings on discounted agency callables, all of which are subject to change. In this chart, we highlight the yield to maturity (YTM) and the number of basis points (bps) it beats the comparable agency bullet as of August 1st. We believe this to be a most likely scenario. We also show the extremely high unlikely yield to next call (YTC).
Agency bullet bonds have been a valued option for institutions for many years. They are both high quality and liquid. There is another option for your portfolio that shares similar characteristics with a relatively small call risk, an agency callable bond. The coupon is much lower than current market and the current price is lower than par. With a discounted price and the general view that market yield will continue to rise, there is a strong belief that discounted callables will go to maturity.
In the chart below you will find an example of market offerings on discounted agency callables, all of which are subject to change. In this chart, we highlight the yield to maturity (YTM) and the number of basis points (bps) it beats the comparable agency bullet as of August 1st. We believe this to be a most likely scenario. We also show the extremely high unlikely yield to next call (YTC).
CCB as source as of August 1st.
Please contact your portfolio representative to discuss if discounted callables might be a good fit for your portfolio. We look forward to discussing options that work for your institution.
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