Friday, July 9, 2021 |
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MANAGING DIRECTOR: Scott Carrithers PORTFOLIO SALES AND SERVICE: George Morris • Chris Thompson • Sean Doherty • Kevin Doyle • Mark Tranckino Jeff Goble • Nicole Burczyk • Natalie Regan • Aaron Stoffer • David Farris • Lonnie Harris Brian Schaff • Josh Kiefer • Robert Schuyler • Tom Toburen • Aaron Hemphill • Jared Willhoft |
| 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 |
| 07/01/21 | 0.05 | 0.05 | 0.05 | 0.09 | 0.25 | 0.47 | 0.89 | 1.24 | 1.48 | 2.01 | 2.07 |
| 07/02/21 | 0.05 | 0.05 | 0.05 | 0.08 | 0.24 | 0.45 | 0.86 | 1.19 | 1.44 | 1.98 | 2.05 |
| 07/06/21 | 0.05 | 0.05 | 0.06 | 0.07 | 0.22 | 0.42 | 0.81 | 1.13 | 1.37 | 1.92 | 2.00 |
| 07/07/21 | 0.05 | 0.05 | 0.05 | 0.08 | 0.22 | 0.41 | 0.79 | 1.09 | 1.33 | 1.87 | 1.94 |
| 07/08/21 | 0.06 | 0.06 | 0.06 | 0.07 | 0.19 | 0.37 | 0.74 | 1.06 | 1.30 | 1.84 | 1.91 |
A Trader's Perspective
After a week of renewed strength in the fixed income markets, the 10-year Treasury yield has now dropped roughly 41 basis points from a high this year of 1.74 on March 31 to the current 1.33. Meanwhile, according to the BVAL AAA Index, 10 year muni yields have fallen just 21 basis points since March 31. Despite new issue supply in the municipal market continuing to trail demand, the municipal/treasury ratio has eased up slightly as lighter summer volume and overall market participation has waned.
An enormous amount of uncertainty still permeates all of our markets as inconsistent news reports on unemployment, inflation, infrastructure plans, tax hikes, the Delta variant, etc. leave us all questioning what direction to head. We continue to sympathize with investors and portfolio managers sitting on excess liquidity while they wait for rates to head up, but it’s important to recognize the opportunity cost of inaction as well. We recommend seeking out value in those products that will offer protection against rising rates when that day does come. Municipal “kickers” with coupons of 3% or higher and calls in the 2-7 year range are an excellent example of such products. Consider this Missouri “bank eligible” bond that we currently own and offer:
Even before considering taxable equivalent yields, the 1.25 tax-exempt yield to call is 32 basis points over the corresponding 9/1/2027 Treasury. With a 3% coupon, this bond has a relatively high likelihood of being called, but if not, you will have amortized the premium down to PAR by September, 2027 and will then be holding a 3% tax-exempt bond.
Thanks as always for taking the time to listen to our ideas, and please let us know how we can help.
Thanks as always for taking the time to listen to our ideas, and please let us know how we can help.
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