| Wednesday, July 13, 2022 | ||||||||
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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 |
| 07/06/22 | 1.36 | 1.90 | 2.62 | 2.82 | 2.97 | 2.99 | 2.96 | 2.99 | 2.93 | 3.42 | 3.14 |
| 07/07/22 | 1.55 | 1.95 | 2.64 | 2.87 | 3.03 | 3.05 | 3.05 | 3.07 | 3.01 | 3.45 | 3.20 |
| 07/08/22 | 1.57 | 1.98 | 2.68 | 2.96 | 3.12 | 3.14 | 3.13 | 3.16 | 3.09 | 3.53 | 3.29 |
| 07/11/22 | 1.58 | 2.18 | 2.79 | 2.97 | 3.07 | 3.09 | 3.05 | 3.06 | 2.99 | 3.43 | 3.18 |
| 07/12/22 | 1.63 | 2.22 | 2.78 | 3.07 | 3.03 | 3.07 | 3.01 | 3.01 | 2.96 | 3.37 | 3.13 |
Source: U.S. Department of the Treasury, as of 7/12/2022
Invert Alert! 2YR Vs. 10YR -10BPS...What to do?
What does it mean when the Yield Curve Inverts? One school of thought is an inverted curve is a precursor to a recession, followed by a Fed easing, followed by a steeper curve. Although this is a common chain of events, the timing and magnitude of changes in the curve are unknown.
While we don’t have a crystal ball, these events can be reasonably expected. As such, we should be considering the next move in our balance sheet, including the investment portfolio, which will position us well for the “NEXT” interest rate environment, rather than the “CURRENT” interest rate environment.
This means we should not allow current paper losses in the portfolio to influence the decisions we’re making for future outcomes. Several market indicators are telling us yields are near the highs of the current cycle and we should not be afraid to extend a little. Additionally, we should do our best to limit optionality, or at least favor call protection.
With this in mind, the table below illustrates examples of “consistent cash flow” Agency MBS pools highlighting 15-year pools with a 4.00% coupon. Also below are a couple of Bank Eligible municipals that offer the same favorable tax treatment as Bank Qualified bonds.
Please reach out with any questions and thank you for allowing us to share our thoughts with you.
While we don’t have a crystal ball, these events can be reasonably expected. As such, we should be considering the next move in our balance sheet, including the investment portfolio, which will position us well for the “NEXT” interest rate environment, rather than the “CURRENT” interest rate environment.
This means we should not allow current paper losses in the portfolio to influence the decisions we’re making for future outcomes. Several market indicators are telling us yields are near the highs of the current cycle and we should not be afraid to extend a little. Additionally, we should do our best to limit optionality, or at least favor call protection.
With this in mind, the table below illustrates examples of “consistent cash flow” Agency MBS pools highlighting 15-year pools with a 4.00% coupon. Also below are a couple of Bank Eligible municipals that offer the same favorable tax treatment as Bank Qualified bonds.
Please reach out with any questions and thank you for allowing us to share our thoughts with you.
All examples below are subject to change and availability, indications only
Important facts on this issue
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Proceeds are being issued for the purpose of refunding previously issued Utility Indebtedness secured by the Net Revenues and pay costs of issuance
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The Bonds and the interest thereon will constitute special obligations of the City, payable solely from, and secured as to the payment of principal and interest by a pledge of, the net revenues of the Utility
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