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Wednesday, November 7, 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 |
| 10/31/18 | 2.20 | 2.34 | 2.49 | 2.69 | 2.87 | 2.93 | 2.98 | 3.07 | 3.15 | 3.30 | 3.39 |
| 11/1/18 | 2.21 | 2.32 | 2.49 | 2.67 | 2.84 | 2.91 | 2.96 | 3.06 | 3.14 | 3.29 | 3.38 |
| 11/2/18 | 2.19 | 2.33 | 2.50 | 2.70 | 2.91 | 2.98 | 3.04 | 3.13 | 3.22 | 3.37 | 3.46 |
| 11/5/18 | 2.20 | 2.36 | 2.51 | 2.71 | 2.91 | 2.99 | 3.03 | 3.12 | 3.20 | 3.34 | 3.43 |
| 11/6/18 | 2.23 | 2.35 | 2.52 | 2.72 | 2.93 | 3.01 | 3.05 | 3.14 | 3.22 | 3.35 | 3.43 |
Source: U.S. Department of the Treasury, as of 11/6/2018
MUNICIPAL YIELDS ARE UP – SO IS YOUR INCOME
Since the Fed begin tightening three years ago there have certainly been matters which have affected the municipal market (such as the general rise in rates, flattening yield curves, a new Presidential administration and tax reform).
Despite it all, there’s still a case to extend with municipal credits. Consider the table below which compares the present day AAA taxfree yield curve to the same in Nov 2015.
Source: Bloomberg 11/06/18
The shortest maturities have risen the most. But investors who opted not to extend in the generally steep curve (3yrs ago) missed out on greater INCOME while waiting and sitting in cash (or reasonable substitutes). This is not dismissive of the fact that investors who did buy out on the steep curve in 2015 have unrealized losses today. But from an income perspective (real cash, paid and received) those investors have earned far more than the “waiting for higher rates” crowd. Given that the lion’s share of municipal market participants are “buy and hold” investors, this is an important distinction and earnings advantage.
Bottom line: Find the proper mix of credit quality and income profile and buy accordingly. Your Country Club Bank Capital Market’s representative is happy to assist you in this regard.
Since the Fed begin tightening three years ago there have certainly been matters which have affected the municipal market (such as the general rise in rates, flattening yield curves, a new Presidential administration and tax reform).
Despite it all, there’s still a case to extend with municipal credits. Consider the table below which compares the present day AAA taxfree yield curve to the same in Nov 2015.
Source: Bloomberg 11/06/18
The shortest maturities have risen the most. But investors who opted not to extend in the generally steep curve (3yrs ago) missed out on greater INCOME while waiting and sitting in cash (or reasonable substitutes). This is not dismissive of the fact that investors who did buy out on the steep curve in 2015 have unrealized losses today. But from an income perspective (real cash, paid and received) those investors have earned far more than the “waiting for higher rates” crowd. Given that the lion’s share of municipal market participants are “buy and hold” investors, this is an important distinction and earnings advantage.
Bottom line: Find the proper mix of credit quality and income profile and buy accordingly. Your Country Club Bank Capital Market’s representative is happy to assist you in this regard.
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