| Wednesday, February 19, 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 |
| 02/11/25 | 4.33 | 4.33 | 4.34 | 4.24 | 4.29 | 4.31 | 4.37 | 4.45 | 4.53 | 4.80 | 4.75 |
| 02/12/25 | 4.33 | 4.33 | 4.36 | 4.28 | 4.36 | 4.39 | 4.47 | 4.55 | 4.63 | 4.89 | 4.83 |
| 02/13/25 | 4.33 | 4.33 | 4.36 | 4.26 | 4.31 | 4.33 | 4.39 | 4.46 | 4.53 | 4.80 | 4.74 |
| 02/14/25 | 4.33 | 4.32 | 4.36 | 4.22 | 4.26 | 4.27 | 4.33 | 4.40 | 4.48 | 4.75 | 4.70 |
| 02/18/25 | 4.33 | 4.32 | 4.38 | 4.23 | 4.31 | 4.33 | 4.40 | 4.48 | 4.55 | 4.83 | 4.77 |
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 2/18/2025.
What's Changed?
The Federal Reserve’s forward interest rate projection is viewed as a moving target, and it should be based on the amount of change we’ve seen with this estimate over the past few months. Below are two charts, the interest rate probability in September 2024 and the same from this month. The market went from expecting between 10-11 25 basis point cuts by mid-2026 to now looking at between 1-2. Granted, there have been 4 cuts between September and now, but this is still a drastically different picture. The implied rate in 2026 is now over 100 basis points higher.
So, what does this change mean? Rates could stay elevated for the time being, but the entire yield curve (not just short-term rates) remains above the 10-year historical mean and a reversion could be in store. Furthermore, the re-steepening of the yield curve has created opportunity for investors out on the curve.
Inflation remains warmer than the Fed would like, and economic resiliency in the face of higher rates combined with political pressures have allowed for another chance to improve portfolio health.
Despite the changes outlined above, the investment strategy shouldn’t change at all. Prioritize yield lockout, limit issuer optionality and replace bond roll-off with high quality market yields. We believe bonds like this AA rated City of Beeville, Texas Bank Qualified general obligation municipal bond with a 10-year call fit this strategy. Taxable equivalent yield to worst highlighted below for S corp (29.6%) and C corp (21%) banks.
<Indication only – Subject to change and availability without notice>
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