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Thursday, November 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 |
| 10/25/18 | 2.19 | 2.34 | 2.47 | 2.66 | 2.86 | 2.92 | 2.98 | 3.07 | 3.14 | 3.27 | 3.35 |
| 10/26/18 | 2.16 | 2.33 | 2.47 | 2.63 | 2.81 | 2.85 | 2.91 | 3.00 | 3.08 | 3.23 | 3.32 |
| 10/29/18 | 2.17 | 2.34 | 2.49 | 2.64 | 2.81 | 2.86 | 2.91 | 3.00 | 3.08 | 3.23 | 3.33 |
| 10/30/18 | 2.21 | 2.33 | 2.48 | 2.66 | 2.84 | 2.90 | 2.94 | 3.03 | 3.12 | 3.26 | 3.36 |
| 10/31/18 | 2.20 | 2.34 | 2.49 | 2.69 | 2.87 | 2.93 | 2.98 | 3.07 | 3.15 | 3.30 | 3.39 |
Source: U.S. Department of the Treasury, as of 10/312018
Discounted Callables: Yield Enhancement
Agency bullet bonds can add to the foundation and value of any financial institutions portfolio. Discounted agency callables are the focus of our conversation this morning. The discounted structure includes the same rating and liquidity with one added benefit…an increased yield to maturity.
Discounted callables were originally issued with coupons lower than where current callables are being brought to market. Their current market price has dropped below par to align the structure with “like” issues and optionality in today’s market. Low interest payments paid from the low coupon typically reduces their desire to call the bonds making them similar to bullets. The call risk can be extremely low but it is not zero so the yield remains above the yield to agency bullets.
Below are current offerings on agency discounted callables. The yield to maturity (YTM) column is highlighted to denote the most likely outcome. This table also reflects the yield pick up to an agency bullet with a similar maturity.
We believe this structure is worth giving a first or second look. Please contact your Investment Sales Officer at CCB Capital Markets Group to discuss if discounted callables would be a good fit for your portfolio.
Discounted callables were originally issued with coupons lower than where current callables are being brought to market. Their current market price has dropped below par to align the structure with “like” issues and optionality in today’s market. Low interest payments paid from the low coupon typically reduces their desire to call the bonds making them similar to bullets. The call risk can be extremely low but it is not zero so the yield remains above the yield to agency bullets.
Below are current offerings on agency discounted callables. The yield to maturity (YTM) column is highlighted to denote the most likely outcome. This table also reflects the yield pick up to an agency bullet with a similar maturity.
We believe this structure is worth giving a first or second look. Please contact your Investment Sales Officer at CCB Capital Markets Group to discuss if discounted callables would be a good fit for your portfolio.
Indications only. Prices, Yields and availability subject to change
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