| Wednesday, October 25, 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 |
| 10/18/23 | 5.40 | 5.49 | 5.57 | 5.46 | 5.22 | 5.05 | 4.93 | 4.95 | 4.91 | 5.23 | 4.99 |
| 10/19/23 | 5.40 | 5.47 | 5.54 | 5.42 | 5.16 | 5.01 | 4.95 | 5.01 | 4.99 | 5.34 | 5.11 |
| 10/20/23 | 5.39 | 5.46 | 5.54 | 5.40 | 5.08 | 4.92 | 4.86 | 4.92 | 4.92 | 5.29 | 5.08 |
| 10/23/23 | 5.41 | 5.46 | 5.54 | 5.41 | 5.05 | 4.87 | 4.80 | 4.86 | 4.85 | 5.20 | 5.00 |
| 10/24/23 | 5.40 | 5.44 | 5.56 | 5.44 | 5.10 | 4.90 | 4.81 | 4.85 | 4.81 | 5.15 | 4.94 |
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 10/24/2023.
As the tune this fall has moved from “how high?” to “how long?”, longer term rates have ticked back up to levels we thought were gone - presenting an opportunity to buy.
Most bank balance sheets still aren’t in a cash heavy position, if there is extra liquidity at all. This, paired with a continued steady stream of loan demand, has halted bond buying, but should it? All of these conditions can (read: will) change. Deposits can shift. Loan demand can pause. Interest rates could take a nosedive. Rates across the curve are setting 16-year highs. How many times over the past 16 years would you have bought a plain vanilla 5-6% bond if it came across your desk? Likely any time you had cash. And then when you didn’t, you’d wished you had. It doesn’t seem fair, but the reality is the best time to buy a bond is when we can’t*.
*If there is a will, there is a way. If in a borrowed position, use your borrowing cost as your hurdle rate and set up a buying schedule (hello, dollar cost averaging). For the next several months you can make a plan to buy these nearly two decade high yields, if they are over your current borrowing rate. Even though there are still inversions throughout the treasury curve, there are other sectors where we can add duration and spreads that likely produce a positive arbitrage.
Consider the following sampling of 5.50%+ offerings when implementing your plan.
Most bank balance sheets still aren’t in a cash heavy position, if there is extra liquidity at all. This, paired with a continued steady stream of loan demand, has halted bond buying, but should it? All of these conditions can (read: will) change. Deposits can shift. Loan demand can pause. Interest rates could take a nosedive. Rates across the curve are setting 16-year highs. How many times over the past 16 years would you have bought a plain vanilla 5-6% bond if it came across your desk? Likely any time you had cash. And then when you didn’t, you’d wished you had. It doesn’t seem fair, but the reality is the best time to buy a bond is when we can’t*.
*If there is a will, there is a way. If in a borrowed position, use your borrowing cost as your hurdle rate and set up a buying schedule (hello, dollar cost averaging). For the next several months you can make a plan to buy these nearly two decade high yields, if they are over your current borrowing rate. Even though there are still inversions throughout the treasury curve, there are other sectors where we can add duration and spreads that likely produce a positive arbitrage.
Consider the following sampling of 5.50%+ offerings when implementing your plan.
Indications only, subject to change and availability without notice.
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