Wednesday, October 12, 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 |
| 10/04/22 | 2.91 | 3.45 | 3.98 | 4.15 | 4.10 | 4.08 | 3.84 | 3.73 | 3.62 | 3.95 | 3.70 |
| 10/05/22 | 2.89 | 3.46 | 4.00 | 4.14 | 4.15 | 4.17 | 3.96 | 3.87 | 3.76 | 4.05 | 3.78 |
| 10/06/22 | 3.05 | 3.46 | 4.04 | 4.19 | 4.23 | 4.24 | 4.05 | 3.95 | 3.83 | 4.08 | 3.81 |
| 10/07/22 | 3.03 | 3.45 | 4.09 | 4.24 | 4.30 | 4.33 | 4.14 | 4.03 | 3.89 | 4.13 | 3.86 |
| 10/11/22 | 3.07 | 3.67 | 4.17 | 4.28 | 4.30 | 4.31 | 4.14 | 4.06 | 3.93 | 4.19 | 3.92 |
Source: U.S. Department of the Treasury, as of 10/11/2022
HERE TODAY, GONE TOMORROW?
Treasuries currently sit well above decade highs across the curve. These higher levels present great opportunities for investors to position their portfolios for success in future years. Some of the highest performing portfolios added duration in 2008-2010 and successfully had earnings well above shorter positioned peers. There are many opportunities to add both duration and yield to the portfolio in the current market; however, at current levels you can do so at discounted bond offerings.
Purchasing discount bonds provides an additional advantage in a declining rate environment, and in today’s market you do not need to drop significantly in coupon to obtain discount prices. There are many different products and structures offered at discounted levels today. Below are 3 different types of taxable offerings all currently offered at a discount. <All offerings are indications only, subject to change and availability>
Discounted Callable:
Fixed Rate MBS:
Source: Bloomberg
Purchasing discount bonds provides an additional advantage in a declining rate environment, and in today’s market you do not need to drop significantly in coupon to obtain discount prices. There are many different products and structures offered at discounted levels today. Below are 3 different types of taxable offerings all currently offered at a discount. <All offerings are indications only, subject to change and availability>
Discounted Callable:
- Greatly outperforms to the call
- One year call protection
- Maintains a 4.35% Coupon
| Security | Tkr | Cpn | Mty | Nxt Call | A Px | A YTM | A YTNC | Call Typ |
| 3130ATAP2 | FHLB | 4.35 | 9/29/2027 | 9/29/2023 | 98.45 | 4.703 | 6.027 | Quarterly |
Fixed Rate MBS:
- Discounted prices available at different tenors
- Longer 5 & 5.5% Pools can be purchased at a discount
| Pool | Sector | Coupon | WAC | Price | Yield | I Spread | WAL |
| FRSB8190 | MBS 15yr | 4.5 | 5.239 | 98-02+ | 4.88% | 75 | 6 |
| FRRB5175 | MBS 20yr | 4 | 4.795 | 93-10+ | 5.12% | 108 | 8 |
| FRRB5183 | MBS 20yr | 4.5 | 5.44 | 96-01+ | 5.22% | 114 | 7 |
| FNMA4656 | MBS 30yr | 4.5 | 5.408 | 94-26+ | 5.27% | 130 | 10 |
| FRSD8246 | MBS 30yr | 5 | 5.896 | 96-31+ | 5.48% | 148 | 9 |
| FNMA4807 | MBS 30yr | 5.5 | 6.084 | 99-05 | 5.65% | 159 | 8 |
Discounted DUS Pools:
- For those looking for an alternative to agency bullets, this balloon structure is a great option.
- Offered at a deep discount.
Source: Bloomberg
Regardless of your preferred structure, take advantage of current levels to set up your portfolio for future success. We recommend not missing out on levels today that may not be here tomorrow.
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