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Wednesday, September 19, 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 |
| 9/12/18 | 2.01 | 2.16 | 2.33 | 2.56 | 2.74 | 2.82 | 2.87 | 2.93 | 2.97 | 3.04 | 3.11 |
| 9/13/18 | 2.01 | 2.15 | 2.33 | 2.55 | 2.76 | 2.83 | 2.87 | 2.93 | 2.97 | 3.04 | 3.11 |
| 9/14/18 | 2.02 | 2.16 | 2.33 | 2.56 | 2.78 | 2.85 | 2.90 | 2.96 | 2.99 | 3.07 | 3.13 |
| 9/17/18 | 2.02 | 2.16 | 2.35 | 2.57 | 2.78 | 2.85 | 2.89 | 2.96 | 2.99 | 3.07 | 3.13 |
| 9/18/18 | 2.05 | 2.17 | 2.36 | 2.58 | 2.81 | 2.88 | 2.94 | 3.01 | 3.05 | 3.14 | 3.20 |
Source: U.S. Department of the Treasury, as of 09/18/2018
Don't Wait 10 Years for 3.00%
The yield on U.S. Treasury 10yr note crossed 3.00% again this week and reached a high of 3.068% overnight before retreating a bit. This is a level that the market has not seen since May when the note climbed as high at 3.13%. This move in treasuries is also pushing yields higher in other products as well like agencies, MBS, and municipal bonds. The escalation in the U.S. 10yr note continues to approach the multi-year high, which seems to have momentum, considering that even the newest installation of tariffs on an additional $200 billion in Chinese goods had no recent impact on treasury yields.
3.00% is psychological but a hurdle that many investors look for. However, investing in a 10yr maturity at that level is much harder to swallow when there are plenty of other bonds out there – like those mentioned above – that will provide 3.00% in a shorter amount of time. The tradeoff is the downgrade of liquidity and credit quality when shifting to those other products.
Investors that use their bonds for liquidity, for cash to fund loans or other cash needs, while wanting to minimize value loss as rates rise should look at shorter bullet agencies. Bullet agencies are the closest thing to a U.S. Treasury and the liquidity and credit quality downgrade is very minimal. A FHLB 3.25% 6/9/2023 bullet agency is currently offered at $101.09 (3.00% YTM). That is a 4.75 year note that picks up a few more bps while staying shorter in maturity versus U.S. Treasuries.
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