| Thursday, December 10, 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 • Natalie Regan • Aaron Stoffer • David Farris |
| 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 |
| 12/03/20 | 0.08 | 0.08 | 0.09 | 0.10 | 0.16 | 0.21 | 0.40 | 0.67 | 0.92 | 1.46 | 1.67 |
| 12/04/20 | 0.07 | 0.09 | 0.10 | 0.11 | 0.16 | 0.21 | 0.42 | 0.70 | 0.97 | 1.53 | 1.73 |
| 12/07/20 | 0.09 | 0.08 | 0.10 | 0.10 | 0.14 | 0.20 | 0.40 | 0.67 | 0.94 | 1.49 | 1.69 |
| 12/08/20 | 0.08 | 0.09 | 0.09 | 0.10 | 0.14 | 0.20 | 0.39 | 0.65 | 0.92 | 1.46 | 1.67 |
| 12/09/20 | 0.07 | 0.08 | 0.09 | 0.10 | 0.16 | 0.21 | 0.41 | 0.68 | 0.95 | 1.48 | 1.69 |
Source: U.S. Department of Treasury as of 12/09/2020
Match Funding with Brokered Deposits
We continue to have conversations with banks recently regarding how cheap deposits are and the current benefit of issuing brokered CDs, even if your bank is continues to experience higher than normal cash balances. The benefits of accessing cheap money by issuing CDs remain and we believe should still be considered. Rather than considering the cash being raised as going directly to Fed Funds, you could add funds to your bond portfolio with targeted maturities shorter than when the brokered CDs come due. Additionally, adding a call date for 5-10bps could add flexibility to that final payoff.
Below are the current indications for issuing brokered CDs. For illustrative purposes, a 5MM purchase summary is shown. This purchase is spread between a municipal, agency bullets, CDs and two mortgage pools. In this example scenario, the average life is less than 3.5 years and weighted average yield is over 50bps. Looking to the 3.5 year part of the curve on raising deposits, the current indication is cheaper than where funds can be reinvested. Though, looking to issue a longer fixed rate callable could be better with the thought we are looking at higher yields in the future.
Call us to discuss a plan that would be beneficial for your bank’s balance sheet.
Match Funding with Brokered Deposits
We continue to have conversations with banks recently regarding how cheap deposits are and the current benefit of issuing brokered CDs, even if your bank is continues to experience higher than normal cash balances. The benefits of accessing cheap money by issuing CDs remain and we believe should still be considered. Rather than considering the cash being raised as going directly to Fed Funds, you could add funds to your bond portfolio with targeted maturities shorter than when the brokered CDs come due. Additionally, adding a call date for 5-10bps could add flexibility to that final payoff.
Below are the current indications for issuing brokered CDs. For illustrative purposes, a 5MM purchase summary is shown. This purchase is spread between a municipal, agency bullets, CDs and two mortgage pools. In this example scenario, the average life is less than 3.5 years and weighted average yield is over 50bps. Looking to the 3.5 year part of the curve on raising deposits, the current indication is cheaper than where funds can be reinvested. Though, looking to issue a longer fixed rate callable could be better with the thought we are looking at higher yields in the future.
Call us to discuss a plan that would be beneficial for your bank’s balance sheet.
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