Wednesday, August 2, 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 • Larry Russell •  Mark Tranckino • Robert Schuyler  Tom Toburen • Josh Kiefer • Nicole Burczyk • Kelley Frye • Natalie Regan • Aaron Stoffer

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
7/25/17	.96	1.18	1.15	1.24	1.40	1.56	1.90	2.15	2.33	2.67	2.91
7/26/17	1.02	1.13	1.14	1.23	1.36	1.50	1.83	2.09	2.29	2.65	2.89
7/27/17	1.01	1.11	1.13	1.22	1.36	1.52	1.84	2.12	2.32	2.68	2.93
7/28/17	1.00	1.08	1.13	1.22	1.34	1.51	1.83	2.10	2.30	2.65	2.89
7/31/17	1.00	1.07	1.13	1.23	1.34	1.51	1.84	2.11	2.30	2.66	2.89
8/1/17	1.00	1.08	1.15	1.22	1.34	1.50	1.80	2.07	2.26	2.61	2.86

                       More Favorable Treatment for Interest Rate Swaps approved…

The Financial Accounting Standards Board (FASB) is poised to release new guidelines on the qualifications for Hedge Accounting treatment for interest rate swaps. Currently, institutions that participate in the swaps market have had to adhere to fairly strict guidelines for Fair Value and Cash Flow hedges to ensure gains and losses in the market value of swaps are not reported on the income statement.

The new guidelines, approved in June and effective in September, will ease the requirements for hedge accounting and expand the types of hedge strategies that are available to banks. 

The new rules open up hedge accounting for partial term hedges, for example the first or last five years of a 10-year asset or liability, this will give banks the opportunity to hedge callable Agencies (locking in a spread over funding costs), to hedge TRPS and to hedge callable CD issuance.  The new rules create opportunities to hedge pools of fixed rate loans (even those that do not include pre-payment penalties), also to hedge pools of MBS. 

The rules eliminate the impact of hedge “inefficiency” on the income statement for qualifying hedges, and also allow for “qualitative” rather than “quantitative” tests to meet reporting requirements.  All in all, this means a more common-sense approach to hedge accounting and more opportunities to manage rate risk.

There is a lot to digest in this new ruling, too much to get into detail here, but if you would like to discuss this further give our team at AMG a call. We would be happy to set up a conference call with your team to discuss these changes.

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.

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