Wednesday, March 4, 2020 |
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| MANAGING DIRECTOR: Scott Carrithers PORTFOLIO SALES AND SERVICE: Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty Kevin Doyle • Lonnie Harris • Mark Tranckino • Robert Schuyler • Tom Toburen • Josh Kiefer Nicole Burczyk • Kelley Frye • Natalie Regan • Aaron Stoffer • Chuck Honeywell |
| 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 |
| 02/26/20 | 1.59 | 1.53 | 1.42 | 1.26 | 1.16 | 1.14 | 1.14 | 1.25 | 1.33 | 1.64 | 1.81 |
| 02/27/20 | 1.56 | 1.45 | 1.33 | 1.18 | 1.11 | 1.08 | 1.11 | 1.22 | 1.30 | 1.61 | 1.79 |
| 02/28/20 | 1.45 | 1.27 | 1.11 | 0.97 | 0.86 | 0.85 | 0.89 | 1.03 | 1.13 | 1.46 | 1.65 |
| 03/02/20 | 1.41 | 1.13 | 0.95 | 0.89 | 0.84 | 0.85 | 0.88 | 1.01 | 1.10 | 1.46 | 1.66 |
| 03/03/20 | 1.11 | 0.95 | 0.83 | 0.73 | 0.71 | 0.72 | 0.77 | 0.91 | 1.02 | 1.44 | 1.64 |
(Un)expected Fed Cut
Yesterday the Fed cut the overnight rate 50bps, making the target rate 1.00% - 1.25%. This came two weeks before the next scheduled meeting where they normally make rate adjustments – this is only the fifth time they have done an intra-meeting cut. Talks of a cut sooner than later had been making its way to the forefront of conversations but before the meeting and being 50bps wasn’t how most thought it would happen. After the market rally over the last several weeks as the Coronavirus made its way to the United States, they saw a cut to be fit. This pushed yields down further, with the 10YR closing at 0.999% - the lowest in history. Now there is speculation that the Fed could cut another 50bps at the meeting on the 18th.
Yields fell in almost every sector of the bond market and could continue to do so if the rumors of another 50bps cut persist. Investing excess liquidity now will be the correct move if the market prices in another rate cut prior to the Fed’s action.
As rates are down all across the curve, long term funding rates are also the lowest they’ve ever been. When current cost of funds for banks are fairly low and funding sources are not much higher, looking to lock in these low rates with longer term funding is an idea that should be explored. Banks can issue brokered CDs under 2% out to 15 Years and at a ~2.10% for 20 Years with a call option. Issuing debt or raising deposits with the option of a call at the lowest rates in history should be a “big picture” consideration for long term planning for your bank.
Indicative rates shown below. Please call us with specific inquiries / live pricing.
Yields fell in almost every sector of the bond market and could continue to do so if the rumors of another 50bps cut persist. Investing excess liquidity now will be the correct move if the market prices in another rate cut prior to the Fed’s action.
As rates are down all across the curve, long term funding rates are also the lowest they’ve ever been. When current cost of funds for banks are fairly low and funding sources are not much higher, looking to lock in these low rates with longer term funding is an idea that should be explored. Banks can issue brokered CDs under 2% out to 15 Years and at a ~2.10% for 20 Years with a call option. Issuing debt or raising deposits with the option of a call at the lowest rates in history should be a “big picture” consideration for long term planning for your bank.
Indicative rates shown below. Please call us with specific inquiries / live pricing.
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