| Tuesday, September 10, 2019 |
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| 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 |
| 09/03/19 | 2.06 | 1.98 | 1.88 | 1.72 | 1.47 | 1.38 | 1.35 | 1.42 | 1.47 | 1.77 | 1.95 |
| 09/04/19 | 2.05 | 1.97 | 1.87 | 1.69 | 1.43 | 1.36 | 1.32 | 1.40 | 1.47 | 1.77 | 1.97 |
| 09/05/19 | 2.05 | 1.97 | 1.88 | 1.73 | 1.55 | 1.47 | 1.43 | 1.51 | 1.57 | 1.86 | 2.06 |
| 09/06/19 | 2.05 | 1.96 | 1.88 | 1.73 | 1.53 | 1.46 | 1.42 | 1.50 | 1.55 | 1.83 | 2.02 |
| 09/09/19 | 2.04 | 1.96 | 1.87 | 1.74 | 1.58 | 1.52 | 1.49 | 1.57 | 1.63 | 1.91 | 2.11 |
Where to Reinvest Roll Off
Next week the Fed is likely to cut overnight rates at least 25bps and the Treasury market is anticipating this move. There could be volatility following the announcement should the Fed decide to cut an additional 25bps, instead of later in the year. Active bond buyers and issuers of brokered deposits ideally would like to align their transactions and funding with the best rates possible, but essentially are timing their decisions based on an educated guess. No matter the size of the bond portfolio, there can be worries of real dollars that could be left on the table along with real questions from board members. These two fears can have a negative impact on the decision making process.
As bonds are inevitably called away as rates decline, putting these dollars to work in a similar yielding instrument, generally with a longer duration, is not always available without taking on additional credit risk. Credit considerations in the bond portfolio should be as important as it is in loan underwriting. MBS Pools provide loan level detail but since the pool is made up of a truckload of loans, the weighted averages can give the investor a good idea of the collateral – and on top of that, it is all wrapped into a government sponsored agency product.
This specific Seasoned 15YR 2.50% pool hits all the marks. With this pool, the underlying credit qualities check the box of being within limits of comfort (outlined below), the historical speeds (cashflow) have been consistent, the dollar price is just under 102 – not risking too much premium and there are positive spreads in all rate scenarios.
1MM Current Face offered at 2.01% / 4.4YR Average Life / +49bps
Please call if you would like more information on this pool.
As bonds are inevitably called away as rates decline, putting these dollars to work in a similar yielding instrument, generally with a longer duration, is not always available without taking on additional credit risk. Credit considerations in the bond portfolio should be as important as it is in loan underwriting. MBS Pools provide loan level detail but since the pool is made up of a truckload of loans, the weighted averages can give the investor a good idea of the collateral – and on top of that, it is all wrapped into a government sponsored agency product.
This specific Seasoned 15YR 2.50% pool hits all the marks. With this pool, the underlying credit qualities check the box of being within limits of comfort (outlined below), the historical speeds (cashflow) have been consistent, the dollar price is just under 102 – not risking too much premium and there are positive spreads in all rate scenarios.
1MM Current Face offered at 2.01% / 4.4YR Average Life / +49bps
Please call if you would like more information on this pool.
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