Wednesday, October 20, 2021 |
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MANAGING DIRECTOR: Scott Carrithers PORTFOLIO SALES AND SERVICE: George Morris • Chris Thompson • Sean Doherty • Kevin Doyle • Mark Tranckino Jeff Goble • Nicole Burczyk • Natalie Regan • Aaron Stoffer • David Farris • Lonnie Harris Brian Schaff • Josh Kiefer • Robert Schuyler • Tom Toburen • Aaron Hemphill • Jared Willhoft |
| US Treasury Market | |||||||||||
| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 10/13/21 | 0.03 | 0.05 | 0.06 | 0.11 | 0.37 | 0.66 | 1.09 | 1.38 | 1.56 | 2.00 | 2.05 |
| 10/14/21 | 0.05 | 0.05 | 0.06 | 0.10 | 0.36 | 0.62 | 1.05 | 1.34 | 1.52 | 1.97 | 2.02 |
| 10/15/21 | 0.04 | 0.05 | 0.06 | 0.12 | 0.41 | 0.70 | 1.13 | 1.42 | 1.59 | 2.02 | 2.05 |
| 10/18/21 | 0.05 | 0.06 | 0.06 | 0.11 | 0.44 | 0.72 | 1.16 | 1.43 | 1.59 | 1.99 | 2.01 |
| 10/19/21 | 0.06 | 0.05 | 0.06 | 0.11 | 0.41 | 0.71 | 1.17 | 1.47 | 1.65 | 2.07 | 2.09 |
Fighting the FED ….. And a Fall Harvest
“Don’t fight the FED” is an investment mantra that suggests investors should always align their thoughts and actions with those of the FED. Usually this stance has proven to be a good one. Lately however, as the FED has continued to espouse its view that current inflation pressures are “transitory,” we are seeing increasing push back from credible market observers who believe today’s inflation creep in housing, energy and food prices as well as wage increases and surging commodity prices is a growing problem that is indeed far more than just transitory. Among these officials are James Gorman (Morgan Stanley CEO), John Waldron (President of Goldman Sachs), Larry Fink (Black Rock CEO) and Jamie Dimon of JPMorgan Chase. Also in this camp is Mohamed El-Erian, the chief economic advisor at Allianz.
Only time will tell how these diverging opinions will play out – but the gloves have come off. In the meantime, we continue to believe being overweight in short defensive cash flow products is a good strategy. It might be worth revisiting last Friday’s Portfolio Manager’s Report, an excellent piece authored by our mortgage desk. It speaks to this very topic.
On another note, for those banks that are having record earnings and looking to offset some of that income, the fall quarter is an opportune time for tax loss harvesting. We would suggest looking at your purchases from 2020 in the 4 to 6 year portion of the curve. As you can see below, using the 5 year US Treasury as a proxy, yields have more than doubled from their lows. If you want to be a top performing bank in your peer group, you should prune some of these low book yields, offset income and add current market yields. Over the long-term, tax loss harvesting can add great value to your bank’s earnings.
Source: Bloomberg
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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