| Friday, October 13, 2023 |
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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 |
| 10/05/23 | 5.39 | 5.50 | 5.56 | 5.38 | 5.02 | 4.82 | 4.69 | 4.73 | 4.72 | 5.08 | 4.89 |
| 10/06/23 | 5.43 | 5.51 | 5.59 | 5.43 | 5.08 | 4.89 | 4.76 | 4.81 | 4.80 | 5.17 | 4.97 |
| 10/10/23 | 5.42 | 5.49 | 5.55 | 5.36 | 4.97 | 4.76 | 4.62 | 4.66 | 4.65 | 5.03 | 4.83 |
| 10/11/23 | 5.41 | 5.50 | 5.56 | 5.37 | 4.98 | 4.75 | 4.58 | 4.59 | 4.56 | 4.90 | 4.70 |
| 10/12/23 | 5.41 | 5.51 | 5.57 | 5.41 | 5.07 | 4.85 | 4.69 | 4.72 | 4.70 | 5.06 | 4.86 |
The data in the table above is static as of the time it was pulled, so rates may have changed. Treat all data in this table and PMR as indications only and availability is always subject to change. This information was pulled manually from sources we believe to be reliable. New source, as of 12/12/2022, Bloomberg, L.L.P. As of: close of business 10/12/2023.
A Municipal Trader’s Perspective
What a week it has been. As is often the case, it was an unanticipated event that shook up markets early in the week, leading to a reversal in fixed income yields. After watching the 10-year Treasury climb 150 basis points in exactly six months (from a low of 3.30 on April 6th to a high of 4.80 on October 6th), the shocking and brutal assault on Israel dominated market sentiment at the beginning of the week and a flight to quality drove the 10-year back down to below 4.60.
Meanwhile, the minutes of the Federal Reserve’s Sept. 19-20 meeting were released on Wednesday. The main takeaway seemed to be a message of caution and uncertainty, not lending any further direction on future moves. While all FOMC participants agree that rates should stay restrictive for some time, current futures markets are now pricing in less than a 10% chance of a hike at the next meeting. Slightly stronger than expected PPI and CPI reports on Tuesday and Thursday, however, did keep the possibility of one more hike alive.
Clearly, none of us can forecast exactly when this cycle will reverse for good, but it’s hard to argue that we are not near the peak in yields. We continue to see value in booking current yields on defensively structured products. In the municipal market, we particularly like bank qualified 4-5% coupons with good call protection. Consider this 20 year 5% PSF (Permanent School Fund) enhanced bank qualified offering:
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Maud ISD, Texas Unlimited Tax G.O. Bank Qualified S&P “AAA” (PSF Guaranteed) / A underlying |
TAXABLE EQUIVALENT YIELD * |
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PAR VALUE |
COUPON |
MATURITY |
YTC |
YTM |
PRICE |
YTC |
YTM |
USTN YIELD |
SPREAD (YTC) |
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$965,000 |
5.00% |
8-15-43 |
4.15 |
4.479 |
106.798 |
5.73 |
6.19 |
4.70 |
103 bp |
*Assumes 29.6% S-Corp tax bracket and 2% Cost of Funds / Indication only - availability subject to change without notice
Please let us know if you’d like to discuss this or any other aspect of your portfolio management.
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