Friday, October 28, 2022 |
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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 |
| 10/21/22 | 3.55 | 4.09 | 4.43 | 4.58 | 4.49 | 4.52 | 4.34 | 4.28 | 4.21 | 4.54 | 4.33 |
| 10/24/22 | 3.57 | 4.16 | 4.52 | 4.61 | 4.50 | 4.52 | 4.36 | 4.31 | 4.25 | 4.59 | 4.40 |
| 10/25/22 | 3.56 | 4.14 | 4.50 | 4.60 | 4.42 | 4.45 | 4.25 | 4.17 | 4.10 | 4.45 | 4.26 |
| 10/26/22 | 3.54 | 4.11 | 4.47 | 4.54 | 4.39 | 4.41 | 4.20 | 4.12 | 4.04 | 4.38 | 4.19 |
| 10/27/22 | 3.76 | 4.13 | 4.44 | 4.50 | 4.30 | 4.29 | 4.09 | 4.01 | 3.96 | 4.32 | 4.12 |
Source: U.S. Department of the Treasury, as of 10/27/2022
Recession Outlook…Now What?
While the 10yr/2yr US Treasury spread is often more well-known and talked about in the financial media, the 10yr/3m US Treasury spread is a key metric we pay close attention to. It has correctly predicted the last 4 recessions for the US economy. The 10yr/3m spread is now negative and signaling a recession is due in the near future, likely in 2023 or 2024.
So what should we do with an inverted curve and what is regression still telling us? On a 10yr lookback period, we are still at +3 standard deviations on the 5yr and 10yr UST. This has not happened in the last 10yrs and indicates a cheap bond market. The tried and true CCB decision matrix is an extremely helpful tool to assist in guiding your bank’s balance sheet. Historically now is the time to add investments and duration <Long Bullets & Muni; DUS>, while minimizing and shortening your new liabilities. It is not recommended that investors take out long advances or issue long CDs.
Source: CCB
If you believe the inverted curve is signaling a recession and we will likely be facing lower rates in the future, below are several options we would encourage you to consider.
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.
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