Wednesday, January 18, 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 |
| 01/10/23 | 4.23 | 4.61 | 4.83 | 4.71 | 4.25 | 3.98 | 3.73 | 3.68 | 3.62 | 3.92 | 3.70 |
| 01/11/23 | 4.23 | 4.66 | 4.84 | 4.72 | 4.22 | 3.91 | 3.65 | 3.60 | 3.54 | 3.83 | 3.67 |
| 01/12/23 | 4.21 | 4.59 | 4.78 | 4.66 | 4.14 | 3.81 | 3.53 | 3.49 | 3.44 | 3.74 | 3.57 |
| 01/13/23 | 4.44 | 4.60 | 4.78 | 4.68 | 4.24 | 3.90 | 3.61 | 3.56 | 3.51 | 3.78 | 3.61 |
| 01/17/23 | 4.46 | 4.60 | 4.76 | 4.68 | 4.21 | 3.88 | 3.62 | 3.59 | 3.55 | 3.82 | 3.66 |
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, LP. As of: close of business 01/17/2023
The Case for Selling Tax-Free Municipals
Whether you are looking to increase portfolio yield or fund additional loan growth, your current tax-free municipal portfolio could be a cost-effective source of funding.
Currently, municipals are expensive for bond buyers in corporate tax brackets (21%) relative to taxable products (treasuries, taxable municipals, callables, mbs). Spreads between the municipal curve and treasury curve are much wider now than they were at the beginning of last year. Over the same time period, municipals inside of 14yrs, have not shifted upward in step with treasuries.
Source: Bloomberg 1-17-23
This presents a great opportunity for portfolio managers to sell tax-free municipals and shift into taxables. Municipals will still likely have losses depending on when they were added to the portfolio, but to a lesser degree in many cases than taxable products. Additionally, given the inverted shape of the taxable yield curve you may even be able to recover the loss without additional extension.
We have also discussed utilizing the bond portfolio to fund loan growth in prior reports. Municipals would be ideal sale candidates if you need liquidity. In many cases, the give up yield and amount of realized loss from a bond sale would be cheaper than wholesale funding rates.
Please contact us to identify tax-free municipals in your portfolio and discuss the above in more detail.
Currently, municipals are expensive for bond buyers in corporate tax brackets (21%) relative to taxable products (treasuries, taxable municipals, callables, mbs). Spreads between the municipal curve and treasury curve are much wider now than they were at the beginning of last year. Over the same time period, municipals inside of 14yrs, have not shifted upward in step with treasuries.
Source: Bloomberg 1-17-23
This presents a great opportunity for portfolio managers to sell tax-free municipals and shift into taxables. Municipals will still likely have losses depending on when they were added to the portfolio, but to a lesser degree in many cases than taxable products. Additionally, given the inverted shape of the taxable yield curve you may even be able to recover the loss without additional extension.
We have also discussed utilizing the bond portfolio to fund loan growth in prior reports. Municipals would be ideal sale candidates if you need liquidity. In many cases, the give up yield and amount of realized loss from a bond sale would be cheaper than wholesale funding rates.
Please contact us to identify tax-free municipals in your portfolio and discuss the above in more detail.
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