| Thursday, August 3, 2017 | ||||||||
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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 |
| 7/27/17 | 1.01 | 1.11 | 1.13 | 1.22 | 1.36 | 1.52 | 1.84 | 2.12 | 2.32 | 2.68 | 2.93 |
| 7/28/17 | 1.00 | 1.08 | 1.13 | 1.22 | 1.34 | 1.51 | 1.83 | 2.10 | 2.30 | 2.65 | 2.89 |
| 7/31/17 | 1.00 | 1.07 | 1.13 | 1.23 | 1.34 | 1.51 | 1.84 | 2.11 | 2.30 | 2.66 | 2.89 |
| 8/1/17 | 1.00 | 1.08 | 1.15 | 1.22 | 1.34 | 1.50 | 1.80 | 2.07 | 2.26 | 2.61 | 2.86 |
| 8/2/17 | 1.02 | 1.08 | 1.15 | 1.24 | 1.36 | 1.52 | 1.82 | 2.08 | 2.27 | 2.60 | 2.85 |
The Dog Days of Summer scream for getting rid of some DOGS!
August, and the proverbial Dog Days, are upon us, and much of our time is preoccupied with Back-to-School and end of summer vacations, however don’t lose sight of the fact that this is also a GREAT time to get our balance sheet prepared for a profitable 4th quarter. There are many strategies we can begin to implement today, that can have a significant impact on this year’s earnings picture.
For example, if liquidity is tight and loan demand is strong, think about issuing CD’s through the brokered CD market and our BalanCD program before funding gets even tighter. This can be done at reasonably cheap levels and you can issue them with call features or steps and call them as needed (just like the agencies have been doing to us for years). These are often cheaper than the alternatives (including borrowing) and are viewed by the market and regulators alike as being of the same wholesale funding type, so there is no additional impact on your liquidity calculation.
You can re-allocate assets from the investment portfolio to the loan portfolio. We spent many years bemoaning the fact that we were forced to invest in securities with less than optimal yields. Now is the time to reverse some of that allocation and reap the benefits of the higher yielding loan portfolio. BTW, if you need assistance with using the Loan Builder tool on the BancPath® website (www.bancpath.com) feel free to give us a call. Reallocation can be done through attrition (letting bonds mature) or through a more active management by “watch listing” those securities that have the highest potential to lose value if rates move against us, and selling these at the best opportunity in the market.
We have been of the opinion that it is still too early to begin an aggressive retail deposit “special” strategy in order to raise more local deposits, and we still believe that to be the case. By running specials (especially out on the curve), we will raise our cost of funds, and have little recourse to reverse that decision if loan rates don’t also rise accordingly. At least with the brokered deposit strategy, we can call those dollars back and start over again at lower rates if needed. If there is pressure from competitors in your local market, and you are unsure of what to do, the next best strategy is to run specials on short term deposits to have a “competitive rate” without locking it in, and regretting it later.
Let us know if there is anything we can do for you to implement any of these strategies. Then you can lie around in your hammock and wait for summer to pass you by.
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