Wednesday, July 24, 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 |
| 07/17/24 | 5.34 | 5.34 | 5.19 | 4.85 | 4.44 | 4.20 | 4.08 | 4.10 | 4.16 | 4.48 | 4.38 |
| 07/18/24 | 5.34 | 5.34 | 5.19 | 4.87 | 4.47 | 4.24 | 4.12 | 4.14 | 4.20 | 4.52 | 4.42 |
| 07/19/24 | 5.35 | 5.33 | 5.19 | 4.88 | 4.51 | 4.28 | 4.16 | 4.18 | 4.24 | 4.55 | 4.44 |
| 07/22/24 | 5.37 | 5.32 | 5.19 | 4.89 | 4.51 | 4.29 | 4.17 | 4.19 | 4.25 | 4.57 | 4.47 |
| 07/23/24 | 5.37 | 5.31 | 5.15 | 4.87 | 4.48 | 4.26 | 4.15 | 4.17 | 4.24 | 4.56 | 4.47 |
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 07/23/2024.
Could Now Be the Time to Extend?
The market is currently pricing in almost one full cut at the September meeting and three cuts by the January 29, 2025 meeting. This can be seen in the Bloomberg (WIRP) chart below. Of course, we have all seen this movie before, but with the unemployment rate now at 4.1%, inflation continuing to trend lower and Chairman Powell hinting of a potential rate cut sometime this year, now may be the time to consider extending duration in your investment portfolio.
Source: Bloomberg, LP
Options we believe are worth considering are described below:
- Option 1 below shows Texas Bank-Qualified municipal bonds guaranteed by the Public School Fund of Texas (PSF) which are Aaa rated. These bonds have a 4.00% coupon, a 2034 call date and 2041 and 2042 maturities. They are projected to gain over 8 points in value if interest rates go down 100 basis points and the tax-equivalent yields on these are 5.50% for S-Corps and 4.91% for C-Corps, providing an opportunity to lock in yields in down rate scenarios and add duration to the investment portfolio. Municipal bonds still offer great value out on the longer end of the curve with spreads to treasury on these bonds of 1.30% (S Corp) and 0.71% (C Corp).
- Option 2 is a 30yr 4.5% Agency Fixed Rate MBS. This bond gains less in the down rate, 6.22 points vs. the 8.33 for the municipals, but also loses less in the up rate and has a yield at base of 5.17%.
- Options 3 and 4 are 30yr 6.0% and 15yr 5.0% Agency Fixed Rate MBS. These bonds are at slight premiums and are lower volatility options to consider as well.
- Option 5 is a discounted callable with a 2035 maturity and gains 7.66 points down 100 but with a yield of 4.71%, the return on this bond vs. the risk being taken is not near as attractive as the TX PSF BQs.
Indications only / Subject to change and availability without notice
For further information these duration extending strategies, please reach out to your Country Club Bank Capital Markets Group Sales Representative.
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