| Wednesday, April 10, 2024 |
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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 |
| 04/03/24 | 5.37 | 5.37 | 5.33 | 5.04 | 4.67 | 4.49 | 4.33 | 4.35 | 4.35 | 4.61 | 4.51 |
| 04/04/24 | 5.36 | 5.36 | 5.30 | 5.01 | 4.65 | 4.46 | 4.30 | 4.31 | 4.31 | 4.58 | 4.48 |
| 04/05/24 | 5.35 | 5.37 | 5.34 | 5.06 | 4.75 | 4.56 | 4.40 | 4.41 | 4.40 | 4.66 | 4.55 |
| 04/08/24 | 5.38 | 5.38 | 5.34 | 5.08 | 4.79 | 4.61 | 4.43 | 4.43 | 4.42 | 4.66 | 4.55 |
| 04/09/24 | 5.38 | 5.36 | 5.32 | 5.04 | 4.74 | 4.56 | 4.38 | 4.37 | 4.36 | 4.60 | 4.50 |
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 4/9/2024.
Agency Callable Rundown
Government Sponsored Agencies are offering nice yields relative to Treasuries. Federal Home Loan Bank (FHLB), Freddie Mac (FHLMC) and Farm Credit (FFCB) have been printing coupons over the past year that nobody has seen in decades, currently even as high as 6.50%.
There may be temptation to buy the highest coupons in the market, but before you do there are a few things to keep in mind prior to purchasing a callable Agency bond:
- Prepare for the “worst case” scenario and view any higher yielding scenarios as a bonus
- Discount bond yields should be assumed to maturity
- Premium bond yields should be assumed to the earliest call date
- Assume optional calls will work in the Agency’s favor
- Be comfortable with the possibility of each call scenario playing out
With new issue par bonds, what you see is what you get regarding the rate. In this inverted curve environment, our recommendation is to limit issuer optionality with extended initial lockouts and fewer potential call opportunities for the issuer. This ensures keeping your book yield in the portfolio for as long as possible.
In a higher rate environment relative to a couple years ago, the prevalence of low coupon discount bonds has risen. Deep discount Agencies, which have a yield to worst priced to final maturity, are another great way to navigate this market. They should be viewed as bullet alternatives, with the “worst case” as locking in yield for the full life of the bond, and any call increases the return yield.
Country Club Bank underwrote the below FHLB Agency bond, which both limits issuer optionality and is offered at a discount.
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