| Wednesday, March 5, 2025 |
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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 |
| 02/26/25 | 4.29 | 4.30 | 4.31 | 4.12 | 4.07 | 4.05 | 4.08 | 4.17 | 4.26 | 4.56 | 4.51 |
| 02/27/25 | 4.31 | 4.30 | 4.30 | 4.12 | 4.05 | 4.03 | 4.08 | 4.17 | 4.26 | 4.57 | 4.53 |
| 02/28/25 | 4.30 | 4.29 | 4.27 | 4.08 | 3.99 | 3.97 | 4.02 | 4.11 | 4.20 | 4.52 | 4.49 |
| 03/03/25 | 4.31 | 4.29 | 4.26 | 4.05 | 3.95 | 3.92 | 3.96 | 4.05 | 4.15 | 4.48 | 4.45 |
| 03/04/25 | 4.32 | 4.29 | 4.25 | 4.06 | 3.99 | 3.98 | 4.04 | 4.14 | 4.24 | 4.57 | 4.53 |
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 3/04/2025.
DUS/PC Bonds Perform!
After reaching a recent yield high in mid-January, the Five-Year US Treasury has moved significantly lower—over 50bps! One of the most attractive investment options available to bond buyers in this environment are US Agency Commercial Mortgage-Backed Securities (CMBS). Commonly referred to as DUS & PC bonds, these highly regarded fixed income securities behave similarly to US Agency bullets (non-callable debentures). DUS/PC bonds often have a short maturity date/balloon feature which erases extension risk in a rising rate scenario. Conversely, they also offer call protection by way of yield maintenance provisions (prepay penalties) when rates are falling. Given these benefits and protections, DUS/PC bonds provide an attractive return profile versus conventional 10-15yr MBS pools.
We see the 5yr sector as offering excellent value on the front end of the curve. DUS/PC bonds currently provide meaningful yield spread vs. a 5yr taxable Muni or bullet agency. If rates stay low, or decline further, we would also expect these bonds to outperform due to the attractive convexity profile. Investors willing to allow a wider principal payback window within a certain maturity range are seeing even greater yield spreads. We favor tighter window structures for the better convexity (i.e.: 5yr final / 4yr principal payback begins). But, yield spreads are wider when the principal window is wider too.
Below is 5/3 structure which is actively trading at a discount $Px with 10-15bps of spread versus a 5/4 ½.
Source: Bloomberg, LP
Please reach out to your Country Club Bank Capital Markets representative to see if Agency DUS/PC bonds are a good fit for your portfolio needs.
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