Friday, August 19, 2022 |
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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 |
| 08/12/22 | 2.23 | 2.63 | 3.13 | 3.26 | 3.25 | 3.18 | 2.97 | 2.92 | 2.84 | 3.34 | 3.12 |
| 08/15/22 | 2.27 | 2.72 | 3.13 | 3.23 | 3.20 | 3.14 | 2.91 | 2.86 | 2.79 | 3.31 | 3.10 |
| 08/16/22 | 2.26 | 2.70 | 3.12 | 3.26 | 3.25 | 3.19 | 2.95 | 2.90 | 2.82 | 3.31 | 3.11 |
| 08/17/22 | 2.22 | 2.68 | 3.15 | 3.27 | 3.28 | 3.27 | 3.04 | 2.99 | 2.89 | 3.37 | 3.15 |
| 08/18/22 | 2.23 | 2.71 | 3.12 | 3.24 | 3.22 | 3.23 | 3.02 | 2.97 | 2.88 | 3.35 | 3.14 |
Source: U.S. Department of the Treasury, as of 8/18/2022
Choose Your Own Adventure
The Fed is well into their tightening cycle with a 2.25%-2.50% Fed Funds range and three meetings remaining this year. As of now, consensus is for a 75 bps hike in September. According to St Louis President Bullard, the target rate should be around 4.00% by year end. The Fed governors have all been beating the drum of fighting inflation and raising rates even if our economy shows signs of recession. However, this is the same Fed who believed inflation was transitory for far too long, so many might still question their resolve. There is not a crystal ball to show what next year will look like, but you can choose your investments based on potential scenarios.
A few strategies to consider:
(All offerings are subject to change and availability / Rates and spreads are also subject to change without notice)
A few strategies to consider:
- If you have cash but aren’t ready to invest long term and believe rates are going down.
- Consider buying the highest coupon with a short call feature earning 4.20%, assuming your market call is correct and this gets called early, instead of 2.30% in overnight funds.
FHLB 4.20 8-25-27/11-22 100-00
- If you have cash but think rates still have room to go up.
- We believe this step-up makes sense: 3.50% for 1 year beating the current 1 year UST by 30 bps and would step to a 5.00% coupon for the remaining 2 years if not called.
FHLB 3.50/5.00 8-25-25/11-22 100-00
- If you think our economy is headed for a recession and we have seen the highs in rates.
- Consider this discounted callable that offers value while picking up 25 basis points over the current 4 year UST.
FHLB 1.10 8-20-26/9-22 91.45 3.40 YTM / 121.40YTC
- If you are unsure the Fed will continue to raise rates in an effort to fight inflation and that if the economy starts to stall, your goal is to own an investment with a decent yield and call protection.
- We like this 2.75y 9m 1x call. This option allows you to pick up +27 basis points to a current 2.5 year UST.
FHLB 3.50 5-23-25/23 1x 99.90 3.54 YTM/ 3.64YTC
Please reach out to your Country Club Bank representative if you have question or would like to discuss further.(All offerings are subject to change and availability / Rates and spreads are also subject to change 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