| Wednesday, July 26, 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 |
| 07/19/23 | 5.26 | 5.40 | 5.48 | 5.31 | 4.76 | 4.34 | 3.98 | 3.87 | 3.75 | 4.03 | 3.84 |
| 07/20/23 | 5.27 | 5.40 | 5.48 | 5.33 | 4.84 | 4.44 | 4.10 | 3.98 | 3.85 | 4.10 | 3.91 |
| 07/21/23 | 5.32 | 5.41 | 5.47 | 5.33 | 4.84 | 4.44 | 4.09 | 3.97 | 3.84 | 4.10 | 3.90 |
| 07/24/23 | 5.38 | 5.42 | 5.48 | 5.38 | 4.92 | 4.51 | 4.15 | 4.02 | 3.87 | 4.13 | 3.93 |
| 07/25/23 | 5.37 | 5.42 | 5.46 | 5.38 | 4.88 | 4.53 | 4.17 | 4.04 | 3.89 | 4.14 | 3.93 |
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 7/25/2023
Random Thoughts and Observations
It’s interesting how over time certain words or expressions fall out of favor in the English language. As a kid growing up in the ‘60s, we thought it was a “cinch” that every year Lombardi’s Packers would win the NFL title, it was a “cinch” that the Celtics would be NBA champions and, of course, it was always a “cinch” the Yankees would win the pennant. It seems the term “cinch” is rarely used anymore, having been replaced by some other expression. According to Bloomberg’s Interest Rate Probability data, there is a “cinch” happening today, and that is the Fed is poised to raise rates by 25 basis points to the 5.25%-5.50% range. The Fed Funds Futures table shown below indicates a 97% probability of such a hike taking place.
Source: Bloomberg 7/26/23
What else does this graph show? Well, it indicates that the Fed is somewhere within the zip code of ending this tightening cycle with only a 22% likelihood of a bump in September and 25% chance of an increase in November. Further, beginning in December, the futures market is expecting the Fed Funds rate to begin falling and continue to fall throughout all of 2024.
It's not just old expressions that have fallen out of favor though. Fixed income purchases by bank investment portfolios have been almost nonexistent throughout all of 2023. This has happened even with bonds providing the highest returns we’ve seen in the past few decades and despite major Wall Street firms touting the value of current fixed income markets. With treasuries yielding in the high 4% range, agency issued MBS yielding 5.25%-5.75%, and even bank qualified investment grade municipals offering 4.00% nominal yields, it’s probably safe to say that a bond purchased in today’s market could be the highest yield in the entire portfolio.
It’s hard to tell if the Fed Funds Futures market is telling us the whole truth. But with the inflation rate moderating over the past several months, it certainly feels like it is. History shows that when rates turn, they usually fall farther and faster than expected, leaving a vanishing overnight rate for bankers, as well as borrowers lined up at the door wanting to refinance.
Please reach out to your Capital Markets Representative to discuss long term strategies for your bank.
It's not just old expressions that have fallen out of favor though. Fixed income purchases by bank investment portfolios have been almost nonexistent throughout all of 2023. This has happened even with bonds providing the highest returns we’ve seen in the past few decades and despite major Wall Street firms touting the value of current fixed income markets. With treasuries yielding in the high 4% range, agency issued MBS yielding 5.25%-5.75%, and even bank qualified investment grade municipals offering 4.00% nominal yields, it’s probably safe to say that a bond purchased in today’s market could be the highest yield in the entire portfolio.
It’s hard to tell if the Fed Funds Futures market is telling us the whole truth. But with the inflation rate moderating over the past several months, it certainly feels like it is. History shows that when rates turn, they usually fall farther and faster than expected, leaving a vanishing overnight rate for bankers, as well as borrowers lined up at the door wanting to refinance.
Please reach out to your Capital Markets Representative to discuss long term strategies for your bank.
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