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Friday,  August  31, 2018

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

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
8/24/18 1.95 2.09 2.25 2.44 2.63 2.68 2.72 2.78 2.82 2.89 2.97
8/27/18 1.96 2.12 2.25 2.47 2.67 2.70 2.74 2.81 2.85 2.92 3.00
8/28/18 1.96 2.13 2.28 2.47 2.67 2.73 2.77 2.84 2.88 2.96 3.03
8/29/18 1.97 2.13 2.28 2.48 2.67 2.75 2.78 2.85 2.89 2.96 3.02
8/30/18 1.97 2.11 2.28 2.47 2.64 2.72 2.75 2.82 2.86 2.93 3.00
                                                                                                                                       Source: U.S. Department of the Treasury, as of 08/30/2018


A Trader's Perspective

Teach a parrot the terms ‘supply and demand’ and you’ve got yourself an economist
                                                                                                        ~ Thomas Carlyle
 

It seems like a lifetime ago when I walked into my first macroeconomics class to the old professor claiming everything comes back to “guns and butter”.  Twenty years later the supply and demand graphs are still important but insert floating debt vs fixed rate debt for todays discussion.  In October of 2016 money market reform was implemented to push short term investors from prime money market funds into government money market funds which has completely changed how the GSE’s issue debt.  The most popular product for the government funds has been floating rate notes.  In the graph below you can see the shift in the Federal Home Loan Banks issuance from bullets and callables to floating rate notes.  This shift has caused a lack of supply in bullets and callables and spreads that continue to get tighter and tighter.  If you are looking for liquidity now might be a good time to sell some bullets.

Source: FHLBanks Office of Finance – settlement date – as of 7/31/18
 


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