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Thursday, September 6, 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 |
| 8/29/18 | 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 |
| 8/31/18 | 1.95 | 2.11 | 2.28 | 2.46 | 2.62 | 2.70 | 2.74 | 2.81 | 2.86 | 2.95 | 3.02 |
| 9/04/18 | 2.00 | 2.13 | 2.29 | 2.49 | 2.66 | 2.73 | 2.78 | 2.85 | 2.90 | 2.99 | 3.07 |
| 9/05/18 | 2.00 | 2.14 | 2.30 | 2.49 | 2.66 | 2.72 | 2.77 | 2.85 | 2.90 | 3.00 | 3.08 |
Source: U.S. Department of the Treasury, as of 09/05/2018
No Time Like the Present
Yesterday we discussed the most common balance sheet positions for community banks we work with. After we have identified a few solutions for each position, let’s look at real numbers.
Below is the Fixed Income Snapshot, showing various product offerings on the curve and where you can pick up decent spread to Treasuries:
Yesterday we discussed the most common balance sheet positions for community banks we work with. After we have identified a few solutions for each position, let’s look at real numbers.
Below is the Fixed Income Snapshot, showing various product offerings on the curve and where you can pick up decent spread to Treasuries:
For Bank A (cash heavy, slowing loan demand), while keeping the portfolio appropriately diversified, looking to seasoned MBS pass-throughs offers spreads at 30-50bps while keeping average life and duration short. These pools will provide the cash flow banks are looking for as rates rise to either roll into additional purchases for the portfolio or new loan production. Put cash to work now and later.
For Bank B (no cash, steady loan demand), in a position where cash is needed but organic growth has been a challenge, raising funds through brokered deposits can be painless and may not have a big effect on overall cost of funds. CD rates inside of 12 months are currently being issued with negative spreads to Treasury rates and stay fairly thin out to 2 years. At 2 years, banks are able to add the call option for about 5bps.
Picking up yield to Treasuries on the buy side or issuing CD’s inside of Treasuries, there are good options to beat Treasuries for either play right now.
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