Portfolio Managers Report: Adding Duration Where You Can 07/30/25

Wednesday, July 30, 2025
MANAGING DIRECTOR: Scott Carrithers PORTFOLIO SALES AND SERVICE: Chris Thompson • Sean Doherty • Mark Tranckino • Brian Schaff Natalie Regan • Aaron Stoffer • David Farris • Jeff Macy Josh Kiefer • Todd Czinege • Trey Valentine • Cody Kreutziger

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
07/23/25	4.28	4.35	4.28	4.08	3.88	3.83	3.93	4.14	4.38	4.92	4.94
07/24/25	4.28	4.35	4.27	4.10	3.92	3.87	3.96	4.16	4.40	4.93	4.94
07/25/25	4.32	4.35	4.27	4.10	3.93	3.87	3.96	4.16	4.39	4.93	4.93
07/28/25	4.33	4.34	4.26	4.10	3.93	3.88	3.97	4.18	4.41	4.96	4.96
07/29/25	4.33	4.34	4.24	4.07	3.87	3.82	3.90	4.09	4.32	4.85	4.86

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 7/29/2025.

Adding Duration Where You Can

The market and the Fed expect interest rates to move lower before they move higher from this point in time. If that is the expectation, then it seems reasonable to be adding slightly longer duration bonds on the balance sheet to preserve some income into the future. With the overall duration of the loan portfolio of the average bank on the BancPath system decreasing from 2.65 years in September 2022 to 2.06 years as of the end of June 2025, getting borrowers to agree to longer terms seems futile as rates have increased.

In the absence of getting borrowers to agree to longer loan terms with prepayment penalties, we believe the next best option is to add proper structure in the investment portfolio. The concept of this structure offers a bullet-like cash flow, or bonds with options at a deep enough of a discount price to create upside potential. Take for example the following bond shown below.

This discounted 30-year MBS with a 4.50 percent coupon is priced at 95 and 12/32nds to yield 5.20% to just over a 6.5-year duration in the base case scenario. Should rates fall 200 basis points and prepayment speeds increase, the yield increases to just over six percent to a three-year duration. If rates fall further, your yield on this investment is likely comparable to many loans being booked in today’s environment, but you would have an asset that could be sold with a gain instead of a loan that will likely refinance in the lower rate environment. If rates remained flat or even increased, your yield could fall slightly, but looks to remain above five percent with limited extension.

If you’re ready to lock in duration in your balance sheet before rates decide to head lower, then reach out to discuss the various options to accomplish that objective.

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