Thursday, February 1, 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

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
1/25/18	1.23	1.42	1.64	1.80	2.08	2.20	2.41	2.55	2.63	2.76	2.89
1/26/18	1.24	1.41	1.64	1.80	2.13	2.24	2.47	2.60	2.66	2.79	2.91
1/29/18	1.28	1.44	1.66	1.80	2.11	2.26	2.49	2.63	2.70	2.82	2.94
1/30/18	1.49	1.44	1.66	1.88	2.13	2.27	2.51	2.65	2.73	2.86	2.98
1/31/18	1.43	1.46	1.66	1.90	2.14	2.29	2.52	2.66	2.72	2.83	2.95

                                                                                      Source: U.S. Department of the Treasury, as of 1/31/18  

Go Down in Coupon?

“With the prospect of higher rates, invest in higher coupon bonds.” We have all heard this for years, and this is a sound principal.  The duration risk is reduced, the higher coupon gives us money back faster to reinvest, and everything else equal, higher coupon pools are less sensitive to interest rate changes. 

While the above is true, there are also opportunities to go down in coupon with minimal extension risk.  Look for pools with short final maturities, offered at deeply discounted prices and where you can pick up additional yield. 

The FNMA 2% coupon pool shown below is an example of stepping down in coupon. The buyer is compensated for going down in coupon with a discounted price of $97.532 and yield of 2.67%.   The final maturity is 2/1/2028 and the extension risk is minimal.  This example presents an opportunity to offset premium purchases within a portfolio while still maintaining cash flow.   

Source: Bloomberg, 2/1/2018

The details on the bond above represent an indication only, prices and availability are subject to change.

                                                                                                                                                                                                                                  

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