Wednesday, September 18, 2024 |
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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 |
| 09/11/24 | 5.09 | 5.00 | 4.75 | 4.12 | 3.64 | 3.46 | 3.45 | 3.54 | 3.65 | 4.04 | 3.97 |
| 09/12/24 | 5.07 | 4.97 | 4.71 | 4.08 | 3.64 | 3.48 | 3.47 | 3.56 | 3.68 | 4.07 | 3.99 |
| 09/13/24 | 5.00 | 4.89 | 4.64 | 4.02 | 3.58 | 3.44 | 3.43 | 3.53 | 3.65 | 4.05 | 3.98 |
| 09/16/24 | 4.92 | 4.87 | 4.59 | 3.96 | 3.55 | 3.41 | 3.40 | 3.49 | 3.61 | 3.99 | 3.92 |
| 09/17/24 | 4.91 | 4.85 | 4.53 | 4.00 | 3.60 | 3.46 | 3.44 | 3.53 | 3.64 | 4.03 | 3.96 |
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 09/17/2024.
Today we wait to for the highly anticipated Fed decision. Many expect to see a 25bps cut to begin the easing cycle (while an equal contingent expects 50bps). The good news for the banking industry is we anticipate deposit flow to increase. However, many banks are still faced with liquidity issues. And nearly all are hoping to take advantage of attractive investment options before yields dip. Given the market price rally over the last several weeks, unrealized losses are substantially diminished and portfolio managers are finding their best opportunity of the last two years to harvest losses.
The Muni sector might be the best place to begin clearing out the low coupon positions. Three to five year credits (tax-free or taxable) are well positioned sale candidates. Banks are getting the opportunity to exit some of the 3-4% TEY book yields at minimal loss compared to recent history.
Reasons it may be a fit for your Bank:
- If you are borrowed at FHLB -> Sell these short maturities to paydown debt and shrink your balance sheet. Market yields are 4%ish…which equates to roughly five rate cuts. Remember, your market yield = borrowing cost. Thus, sale proceeds generated by liquidating at low market yields is the equivalent of achieving low cost deposits.
- Swap into short floaters -> Add a 6%+ current yield on an adjustable product and lower the overall duration of your portfolio. With generous spread vs index adjustable products, it would take over 250bps of cuts before your adjustable yield would be less than the book yield of the legacy bonds you’d be selling.
- Term match duration and reinvest in DUS, PC, ARM or Fixed Rate MBS with 50-70bps of index spread.
Another good option for liquidity is 2% - 4% coupon MBS with relatively short Weighted Average Life (WAL). This is more likely for portfolios seeking to absorb larger percent of book value losses. The continued attraction here is give up yields (aka: market yields) in the low 4% range. The same virtues apply: Portfolios can pay down high cost borrowing with relatively cheap funding or simply reinvest (not shrink) at some of the most attractive yields of this century.
Bottom Line: Opportunities exist on both the SELL side (comparatively low funding cost) and the BUY side (new production near multi-year yield high). If you’re looking for liquidity please reach out to your Country Club Bank representative to examine your current positions and discuss all other ideas that serve your needs well.
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