Thursday, August 17, 2017
MANAGING DIRECTOR: Scott Carrithers   PORTFOLIO SALES AND SERVICE: Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty Robert Brickson • Kevin Doyle • Lonnie Harris • Larry Russell •  Mark Tranckino • Robert Schuyler  Tom Toburen • Josh Kiefer • Nicole Burczyk • Kelley Frye • Natalie Regan • Aaron Stoffer

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
8/10/17	1.02	1.05	1.14	1.22	1.33	1.49	1.78	2.03	2.20	2.55	2.79
8/11/17	.99	1.03	1.14	1.21	1.30	1.43	1.74	2.00	2.19	2.55	2.79
8/14/17	.95	1.02	1.13	1.23	1.33	1.48	1.77	2.04	2.22	2.57	2.81
8/15/17	.97	1.04	1.16	1.23	1.35	1.51	1.83	2.09	2.27	2.60	2.84
8/16/17	.97	1.02	1.13	1.24	1.33	1.49	1.79	2.04	2.23	2.58	2.81

              Source: U.S. Department of the Treasury, as of 8/16/17

---

The Lily Pad You Were Looking For

Stubbornly low interest rates and historically high bond prices have encouraged profit-taking.  If you haven’t examined your bond portfolio with an eye toward capturing surgical gains, you’re missing an opportunity.  But if you have taken gains, or are presently considering it, you may be looking at sitting in overnight funds with sale proceeds yielding 1.125% as a prohibitive negative.  Like an anxious frog sitting on a lily pad, you’d like to jump but won’t until you spy another lily pad suitable for landing.

Ideally, a “reinvestment lily pad” offers reasonable nominal yield without undue price risk and/or extension as rates rise.  Something with steady cashflows that resists extension fits the cause nicely.  But what security delivers these properties for cautious fixed income investors?

Here’s one:  This nearly fully seasoned 15yr (final) 2.50% FHLMC MBS pool priced at 101-25+ produces a nominal yield of 2.00% to the base case WAL of 3.97yrs and does not extend materially if rate rise 300bps (4.28yrs).  It’s been a steady payer at speeds near 11 CPR over the past three and six months and compares favorably to a new issue 10yr fully amortizing pool.  If you’d like to earn incremental nominal yield without additional extension risk, this is your bond.

Ribbit!  Jump on.

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