Tuesday, January 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

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
1/16/18	1.33	1.45	1.63	1.79	2.03	2.12	2.36	2.48	2.54	2.69	2.83
1/17/18	1.31	1.44	1.63	1.79	2.05	2.15	2.39	2.51	2.57	2.71	2.84
1/18/18	1.29	1.45	1.63	1.79	2.05	2.17	2.43	2.55	2.62	2.77	2.90
1/19/18	1.28	1.44	1.62	1.79	2.06	2.20	2.45	2.57	2.64	2.78	2.91
1/22/18	1.27	1.44	1.65	1.79	2.08	2.21	2.46	2.59	2.66	2.79	2.93

                                                                                       Source: U.S. Department of the Treasury, as of 1/22/18  

CREATIVE yet PLAIN VANILLA way to get more spread!

In a market where it is becoming more difficult to find spread, bankers are having to get a little more creative.  One of the creative trades we have done in our own bank portfolio is with discounted callables.

It is a simple concept, buy an older callable issue whose call can be exercised at any moment (anytime) and pay a deep discount to earn a larger spread to maturity versus a bullet with a similar maturity.  The FFCB example below involving a 2.62% YTM offers a 20 BPS spread over a similar maturing bullet.

The “wild card” with a discounted callable is the ability to be called prior to maturity, which will simply enhance your holding period yield by offering early accretion of the discount. 

In conclusion, your worst case is that you own this security to maturity while earning a 20 BPS spread over bullets, your best case is the security is called early.  We only have 965M of the issue in our example remaining, however we are including other available discounted callables should you care to look for a different maturity.  Please make note of the spread to bullets information on the far right of the chart. 

965M available: FFCB 2.49% Coupon Due 5/17/23

Currently Callable Anytime @ 2.62% ytm (99.35 Dollar Price)

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