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
01/07/21	0.09	0.09	0.09	0.11	0.14	0.22	0.46	0.78	1.08	1.64	1.85
01/08/21	0.08	0.08	0.09	0.10	0.14	0.24	0.49	0.81	1.13	1.67	1.87
01/11/21	0.09	0.08	0.10	0.10	0.14	0.22	0.50	0.84	1.15	1.68	1.88
01/12/21	0.09	0.09	0.09	0.11	0.14	0.23	0.50	0.83	1.15	1.68	1.88
01/13/21	0.09	0.09	0.10	0.12	0.14	0.22	0.48	0.80	1.10	1.63	1.82

                                                                                                                                                  Source: U.S. Department of Treasury as of 01/13/2021

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                                                                                      IS THERE A PATTERN HERE?  

Please take a look at the chart below. It is a yield graph of the 10 year Treasury going back to 2012. Some might say it is only a coincidence while others may say it is a reoccurring pattern, but soon after the national Presidential elections, longer term rates began to rise. Although slightly off recent highs, the 10 year Treasury is once again beginning its upwards post-election bias
.
Of course there could be several reasons for this being the case.  Most notably, vaccines are on the way and with that an expected rebound in economic activity. Secondly, more stimulus is all but guaranteed with only the amount in question.

Earlier this week we shared our opinion that now might be a good time to capture gains on MBS higher coupon and faster paying bonds with the idea that a good chunk of those principal dollars will be “going away”. Yesterday we were questioning if the market has run too far and if now might be an ideal time to put money to work.

This is the great thing about our markets.  You can see in them what you want to see and can always make a convincing case for your opinion. This is why we have always recommended to have an interest rate/market bias and invest appropriately.

In addition to MBS securities, we are also seeing very strong bids on municipal securities. One of the reasons for that is what some call the “January Effect”. It is when too much cash is chasing too few bonds. Traditionally there are more municipal bonds maturing and/or being called in January than are being issued during the first quarter.  This shift in activity creates a supply and demand issue and thus strong prices. In fact, this is one of the reasons that over the last decade munis have posted losses in January only twice.

Finally, selling selected municipal holdings could nicely dovetail into a desire to lower the duration and interest rate risk in your portfolio, something that we have highlighted here previously. Please feel free to call your representative with any questions or to discuss possible strategies.





  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.

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