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Wednesday, April 11, 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
4/4/18 1.67 1.71 1.90 2.07 2.28 2.42 2.61 2.73 2.79 2.91 3.03
4/5/18 1.67 1.72 1.93 2.07 2.30 2.45 2.64 2.76 2.83 2.95 3.07
4/6/18 1.68 1.73 1.91 2.06 2.27 2.40 2.58 2.70 2.77 2.89 3.01
4/9/18 1.67 1.76 1.93 2.08 2.29 2.43 2.60 2.72 2.78 2.89 3.02
4/10/18 1.63 1.74 1.93 2.09 2.32 2.45 2.62 2.74 2.80 2.89 3.02

                                                                                      Source: U.S. Department of the Treasury, as of 4/10/18  


One way to prepare for higher rates…
 
Yesterday’s PMR highlighted the long term cyclical possibility that the Treasury market may be on the front end of a long term bear market (meaning lower prices/higher yields).  Well, is your portfolio prepared?
 
You need to ask yourself two questions:
#1: Does my portfolio offer strong consistent cash flow?
#2: Do those cash flows remain consistent when shocked +100 +200 and +300 BPS?
 
If the answer is NO, we would encourage you to consider the following two structures.  If the answer is YES, there is a good chance you own these structures already and I would encourage you to continue to position. 
 
Structure #1: New 15YR FMNA or FHLMC pass through pool
Structure #2: New 10YR FNMA or FHLMC pass through pool
 
Below is a table that allows you to stack these two structures up against each other as well as understand your extension risk in a rising rate scenario.  Cash Flow will be the most important concept if/when rates move higher.

Tomorrow we will highlight a structure that beats all odds in a rising rate environment by not only cash flowing but also limiting your price depreciation.


 

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