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Friday, November 22, 2024
 

MANAGING DIRECTOR:
Scott Carrithers
 
PORTFOLIO SALES AND SERVICE:
Chris Thompson • Sean Doherty • Kevin Doyle • Mark Tranckino • Brian Schaff
Natalie Regan • Aaron Stoffer • David Farris • Jeff Macy 
Josh Kiefer • Tom Toburen • Todd Czinege • Trey Valentine • Cody Kreutziger

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
11/15/24 4.57 4.50 4.47 4.33 4.31 4.28 4.31 4.38 4.44 4.72 4.62
11/18/24 4.59 4.52 4.47 4.33 4.28 4.25 4.28 4.35 4.42 4.71 4.61
11/19/24 4.56 4.52 4.47 4.35 4.28 4.24 4.26 4.33 4.40 4.68 4.58
11/20/24 4.57 4.54 4.47 4.37 4.32 4.27 4.28 4.34 4.41 4.70 4.60
11/21/24 4.59 4.55 4.48 4.39 4.35 4.30 4.30 4.36 4.42 4.68 4.60

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 11/21/2024.

                                                                                                                                                                                        


Agency CMBS For Your Bond Ladder

A bond ladder strategy is a well-established approach for managing fixed income investments and excess bank liquidity. This strategy offers several advantages, particularly in the current market environment.

Key benefits of a bond ladder include:
  1. Regular cashflow: As bonds mature annually, a portion of your investment portfolio becomes available for reinvestment or to fund loans.
  2. Interest rate risk management: The staggered maturity dates help mitigate the impact of interest rate fluctuations and smooth balance sheet volatility. 
  3. Dollar-cost averaging: Reinvesting maturing bonds allows you to take advantage of prevailing market rates, potentially improving overall yield.

For bond ladder strategies, bullet-like structures are often preferred. These include taxable munis, agency bullets, and agency Commercial Mortgage-Backed Securities (CMBS). Among these options, Fannie Mae Delegated Underwriting and Servicing (DUS) and Freddie Mac Participation Certificate (PC) agency CMBS pools have gained popularity.

DUS or PC pools offer several advantages:
  1. Bullet-like returns: They provide predictable cashflows similar to traditional agency bullets.
  2. Wider spreads: Compared to agency bullets or taxable municipal bonds, they often offer more attractive spreads.
  3. Discounted pricing: In today’s market they are often available at discounted dollar prices, potentially offering additional value.

When considering these options, it's important to note that while agency CMBS pools can offer attractive yields and spreads, they may also carry different risks compared to bullet or UST. They do have a small prepayment risk (which we like to limit with a tight window between 100 CPY and 0 CPY forecasts), however this small prepayment risk can become beneficial if you pay a discounted dollar price.  Below are two examples you should consider if you are managing a bond ladder strategy which offer more spread than most sectors which have a bullet like structure. 

1yr WAL Offering
Source: Bloomberg

5yr WAL Offering

Source: Bloomberg



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