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Tuesday, August 21, 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 |
| 8/14/18 | 1.96 | 2.08 | 2.25 | 2.44 | 2.63 | 2.71 | 2.77 | 2.84 | 2.89 | 2.98 | 3.06 |
| 8/15/18 | 1.96 | 2.07 | 2.23 | 2.45 | 2.61 | 2.68 | 2.73 | 2.81 | 2.86 | 2.95 | 3.03 |
| 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 |
Source: U.S. Department of the Treasury, as of 08/20/2018
Curve Flattening Continues ...
We often get asked about yield curves, interest rate outlooks, and strategies for today’s markets. Well, you know what they say about opinions…everyone has one. It is hard to make the case today that interest rates have peaked given that the Federal Reserve Bank indicates they have at least 2, maybe 3, interest rate hikes in mind before evaluating how much further to go. This means that the Prime Rate could be 5.50% - 5.75% before they take a breather. This should be good for financial institutions, right? Higher yields on loans means fatter net interest margins, right? Well, this is the part of the interest rate cycle where margins generally become tight. Loan demand is pretty strong, but the cost of funding those loans is relatively high, and interestingly, through our AMG subsidiary, we are finding the rate banks are able to obtain on variable rate loans is often higher than the fixed rate variety.
The yield curve continues to flatten. Currently the 2-10 spread is just 23 basis points. If this trend continues, it may be time to begin to consider some of the strategies we developed in our Decision Matrix several years ago. This may be a good time to review some of these strategies and have them in your hip pocket should the curve continue to flatten or invert.
Let us know if there is anything we can be doing for you in your investment portfolio, or to meet your ALM or CECL needs.
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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