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Thursday, August 23, 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 |
| 8/16/18 | 1.96 | 2.07 | 2.24 | 2.45 | 2.63 | 2.70 | 2.75 | 2.82 | 2.87 | 2.95 | 3.03 |
| 8/17/18 | 1.95 | 2.05 | 2.24 | 2.44 | 2.61 | 2.68 | 2.75 | 2.82 | 2.87 | 2.95 | 3.03 |
| 8/20/18 | 1.93 | 2.06 | 2.25 | 2.43 | 2.60 | 2.65 | 2.70 | 2.77 | 2.82 | 2.91 | 2.99 |
| 8/21/18 | 1.94 | 2.08 | 2.25 | 2.45 | 2.61 | 2.67 | 2.73 | 2.80 | 2.85 | 2.93 | 3.00 |
| 8/22/18 | 1.95 | 2.09 | 2.24 | 2.43 | 2.60 | 2.65 | 2.70 | 2.77 | 2.82 | 2.91 | 2.99 |
Source: U.S. Department of the Treasury, as of 08/22/2018
Who Doesn’t Like FREE Money?
Everyone likes “FREE” stuff, but oftentimes it turns out that “FREE” is not always without cost.
Here is an opportunity that doesn’t come around very often, and is especially valuable if you know you will have a cash event in the next few months.
Many financial institutions have periodic or temporary cash event(s) that are cyclical and have a known schedule. For example, one client we work with knows they will have a several million dollar swing in liquidity that typically occurs around November, with those funds likely to return after year-end. This event causes a net borrowed position, typically in overnight funds, which is currently around 2.18%. What if instead of waiting until that seasonal event happens and the overnight rate is even higher than it is now, you lock in your funding rate today with virtually no impact to your bottom line and have funds ready when you need them?
In this case, our client could issue 4-5 months CD’s @ 2.00% - 2.05% (All-in), as of this week, and hold those funds in an overnight account at the Fed currently earning 1.95%. This series of transactions offers a near zero cost of liquidity until they are needed to replace the dollars going out in November. If the Fed raises the overnight rate in September, as many expect, they may even enjoy a small spread on these dollars.
In November, when the tide goes out, they will have the funds available to meet this withdrawal. When the funds return in January, they can pay off the CD and the balance sheet goes back to normal.
There are many opportunities in today’s markets, if you are willing to take the time to look for them. We are always searching for opportunities for our clients, please let us help you find the “diamonds-in-the-rough” waiting for you.
Thanks for your continued confidence in us, and letting us work with you. Let us know how we can help.
Everyone likes “FREE” stuff, but oftentimes it turns out that “FREE” is not always without cost.
Here is an opportunity that doesn’t come around very often, and is especially valuable if you know you will have a cash event in the next few months.
Many financial institutions have periodic or temporary cash event(s) that are cyclical and have a known schedule. For example, one client we work with knows they will have a several million dollar swing in liquidity that typically occurs around November, with those funds likely to return after year-end. This event causes a net borrowed position, typically in overnight funds, which is currently around 2.18%. What if instead of waiting until that seasonal event happens and the overnight rate is even higher than it is now, you lock in your funding rate today with virtually no impact to your bottom line and have funds ready when you need them?
In this case, our client could issue 4-5 months CD’s @ 2.00% - 2.05% (All-in), as of this week, and hold those funds in an overnight account at the Fed currently earning 1.95%. This series of transactions offers a near zero cost of liquidity until they are needed to replace the dollars going out in November. If the Fed raises the overnight rate in September, as many expect, they may even enjoy a small spread on these dollars.
In November, when the tide goes out, they will have the funds available to meet this withdrawal. When the funds return in January, they can pay off the CD and the balance sheet goes back to normal.
There are many opportunities in today’s markets, if you are willing to take the time to look for them. We are always searching for opportunities for our clients, please let us help you find the “diamonds-in-the-rough” waiting for you.
Thanks for your continued confidence in us, and letting us work with you. Let us know how we can help.
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