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Tuesday, October 23, 2018

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 • Gus Koppen

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
10/16/18 2.19 2.30 2.46 2.66 2.87 2.95 3.02 3.10 3.16 3.26 3.32
10/17/18 2.20 2.31 2.47 2.66 2.89 2.97 3.04 3.13 3.19 3.29 3.35
10/18/18 2.19 2.32 2.47 2.67 2.87 2.95 3.03 3.11 3.17 3.28 3.36
10/19/18 2.19 2.31 2.48 2.67 2.92 2.99 3.05 3.14 3.20 3.31 3.38
10/22/18 2.18 2.34 2.49 2.68 2.92 2.99 3.05 3.13 3.20 3.31 3.38
                                                                                                                                       Source: U.S. Department of the Treasury, as of 10/22/2018

Heads You Win, Tails They lose!
 
Wouldn’t it be nice going in to a coin flip knowing heads you win, tails they lose?  That is precisely what you are able to do in your portfolio with Seasoned 7/1 Agency ARM’s.  How is this possible?

Heads (Rates move higher) you win!
  • This FHLMC ARM pool has 5 years until the first reset at which time it can reset from the current coupon of 2.56% to as much as 7.56% (or 500 BPS higher), it will then reset every 12 months with a 200 BPS CAP thereafter
  • The coupon will reset at 12 month LIBOR + 164 BPS therefore as long as 12 month LIBOR does not go higher than 5.92% you will enjoy the full reset potential
  • While all your fixed coupon positions lose value this will track the market and have “little to no price depreciation”
Tails (Rates move lower) they lose!
  • As you know lower rates typically means faster prepayments as individual mortgage holders refinance in to lower rates.  You are paying a discount here therefore prepayments above and beyond expectation will simply enhance your holding period yield as you will accrete your discount faster than expected.
As a community bank that manages our own portfolio with the same needs as yours we can assure you this is a structure that will not disappoint, regardless of what rates do.  Even if you are wrong on rates, you will be right on product selection.  Included below is a picture of the Yield Analysis and the Description page.  Call us for a detailed explanation.
 


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