| Wednesday, November 15, 2023 |
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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 |
| 11/08/23 | 5.38 | 5.43 | 5.49 | 5.34 | 4.93 | 4.68 | 4.51 | 4.53 | 4.49 | 4.81 | 4.62 |
| 11/09/23 | 5.39 | 5.43 | 5.48 | 5.38 | 5.02 | 4.79 | 4.64 | 4.67 | 4.63 | 4.96 | 4.77 |
| 11/10/23 | 5.37 | 5.40 | 5.48 | 5.38 | 5.06 | 4.84 | 4.68 | 4.71 | 4.65 | 4.97 | 4.76 |
| 11/13/23 | 5.39 | 5.42 | 5.48 | 5.37 | 5.03 | 4.81 | 4.66 | 4.69 | 4.64 | 4.96 | 4.75 |
| 11/14/23 | 5.38 | 5.39 | 5.41 | 5.23 | 4.83 | 4.59 | 4.43 | 4.47 | 4.44 | 4.81 | 4.62 |
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 11/14/2023.
Year-End is a Time for Dividends
And just like that the 10-year Treasury moved from 4.99 percent on October 19th, to 4.46 percent mid-day November 14th. We have seen over 50 basis points of move in a very short period of time. The market is now reflecting an 85 percent probability of the first Fed rate cut in May of 2024. With this in mind, now could be a great time to start planning our income expectations for the next couple of years.
We recently read in the news that a local community bank made the strategic decision to sell their securities portfolio to improve liquidity and margin going forward. Without enough capital, this transaction isn’t possible. Also, without a bias that rates are at their peak, this may appear risky. Regardless of having a rate bias, there are certain transactions in the bond portfolio that are a net positive regardless of the direction of rates. Take for example the transaction below. Selling a stated maturity Treasury and buying back a deep discounted callable agency to a similar maturity.
Indications only / Subject to change and availability without notice
The treasury (Sell) has a book yield of 1.17% and the agency (Buy) has a yield of 4.938 percent. Taking the $214,258 loss allows you to offset about $45,000 in federal taxes in the current year, for a C-Corp bank. However, the increase in monthly after-tax income is about $4,800. The loss is recovered prior to the maturity of the bond that was sold, the yield on the portfolio has increased and the duration of the portfolio is the same as it was. As always, we recommend you check with your accountant to verify the tax implications of all transactions and tax loss harvesting.
Indications only / Subject to change and availability without notice
If your bank has a solid capital position and looking to increase margin and overall after-tax income in future years, looking at your portfolio now and making moves before year-end is likely to pay dividends into the future.
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