Click Here to Print

Thursday, November 30, 2017

MANAGING DIRECTOR:
Scott Carrithers
 
PORTFOLIO SALES AND SERVICE:
Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty
Robert Brickson • Kevin Doyle • Lonnie Harris •  Mark Tranckino • Robert Schuyler 
Tom Toburen • Josh Kiefer • Nicole Burczyk • Kelley Frye • Natalie Regan • Aaron Stoffer • Chuck Honeywell

US Treasury Market
Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
11/22/17 1.16 1.29 1.45 1.61 1.74 1.84 2.05 2.22 2.32 2.57 2.75
11/24/17 1.14 1.29 1.45 1.61 1.75 1.85 2.07 2.23 2.34 2.58 2.76
11/27/17 1.15 1.27 1.41 1.62 1.74 1.84 2.06 2.21 2.32 2.57 2.76
11/28/17 1.16 1.30 1.46 1.61 1.75 1.85 2.07 2.24 2.34 2.58 2.77
11/29/17 1.17 1.29 1.45 1.61 1.78 1.86 2.09 2.27 2.37 2.62 2.81

                                                                                                                                         Source: U.S. Department of the Treasury, as of 11/29/17  

“TAXMAN”

“Let me tell you how it will be

There’s one for you, nineteen for me

Should five percent appear too small

Be thankful I don’t take it all

Cause I’m the taxman, yeah I’m the taxman”

These lyrics from the 1966 song “Taxman” by the Beatles was a protest of the 95 percent “super tax” imposed by the British government at the time. It reminds us that our tax situation could always be worse.

At the time of this print, it appears that there may indeed be a tax reform package crafted by Congress. As with any legislation, everyone is wanting to make sure they get their “slice of the pie”.

Republican senators Rubio and Lee are introducing an amendment to the Senate bill that would enhance the child tax credit. They propose boosting the credit to $2,000 from the current credit of $1,000 per child under the age of 18. They propose to pay for it by setting the corporate rate at 22 percent.  This proposal would increase the 20 percent rate favored by President Trump by 2 percent. “Right now, 70 percent of the tax cuts we’re considering would go to business, and only 30 percent to individuals” said Rubio and Lee in a joint statement.

Senate Republicans are discussing adding a provision to their tax bill that could trigger up to $350 billion in automatic corporate increases over 10 years beginning in 2022. Republican senators, including Bob Corker of Tennessee, have sought the trigger provisions as a way to prevent the tax cuts from increasing the federal deficit if the anticipated economic growth does not materialize.

Senator’s Ron Johnson of Wisconsin and Steve Daines of Montana have said they want larger tax cuts for pass-through business. They are pushing for a proposed deduction for pass-through businesses, such as partnerships and limited liabilities of 20 percent, versus the current version of 17.4 percent.

The Senate bill would also cut the corporate tax rate to 20 percent from 35 percent, and Trump has said that the 20 percent figure is non-negotiable. The bill already delays the effective start date of the corporate rate cut to Jan. 1, 2019. And the list goes on and on…..stay tuned.

We continue to see value in seasoned mortgage-backed securities like the following FNMA ARM pool 0875. Below please find a yield analysis and description page. Highlights include:

  1. Three years seasoned of a 7/1 year 5/2/5 structure meaning only 4 years to the reset date.

  2. Very consistent 3 and 6 month and 1 year and life time pre-payment speeds.

  3. Paid down to a factor of .61 in 3 years so great cash flows.

  4. Yields 2.57 to a 5.18 year weighted average life.

Source:  Bloomberg 11/29/17



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