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Wednesday, November 6, 2024
 

MANAGING DIRECTOR:
Scott Carrithers
 
PORTFOLIO SALES AND SERVICE:
Chris Thompson • Sean Doherty • Kevin Doyle • Mark Tranckino  Brian Schaff
Natalie Regan • Aaron Stoffer • David Farris • Jeff Macy 
Josh Kiefer • Tom Toburen • 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
10/30/24 4.64 4.58 4.48 4.28 4.18 4.15 4.16 4.23 4.30 4.62 4.50
10/31/24 4.68 4.55 4.46 4.27 4.17 4.13 4.16 4.23 4.29 4.59 4.48
11/01/24 4.64 4.52 4.44 4.27 4.21 4.19 4.23 4.31 4.39 4.70 4.58
11/04/24 4.63 4.53 4.42 4.25 4.16 4.14 4.15 4.22 4.29 4.58 4.47
11/05/24 4.61 4.54 4.42 4.25 4.18 4.14 4.15 4.21 4.27 4.56 4.44

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 11/05/2024.

                                                                                                                                                                                        


Bond Market Update – Beyond Treasuries

Depending on a portfolio managers level of activity, they may or may not have a precise idea of where Treasury levels are and may not have the same understanding of how other sectors are trading in relation. It is not always a parallel shift, nor does it always follow the headlines on the direction of interest rates. For example, the FOMC is expected to cut the overnight rate by 25bps tomorrow after they cut 50bps at the September meeting yet rates between 2-10 years along the curve have increased an average of 65bps in each benchmark.

There are a lot of (potentially) market moving indicators and events coming at us every week that impacts each sector differently so it’s important to understand the current state and relation to treasuries of each. 

·         Treasuries:

o    The curve is normalizing because the front end is coming down while the long bonds have come up

o    5-7 years is the steepest part of the curve with the 1MO being the peak of the curve beating out the 20YR by 1bp

o    The curve between 3-20 years is positive sloping after a long spell of inversions over the past 24 months

o    What is the highest yield in…  2028? October @ 4.26%   2029? December @ 4.29%   2030? October @ 4.30%   2031? July @ 4.36%   2032? August @ 4.39%

·         Agencies:

o    Spreads are narrow historically speaking. Little to no spread over treasuries inside of 5 years. +10-20bps in 6-9 years.

o    Agency new issuance continues to focus on more defensive callables

§  If buying callables, consider taking a little less yield for more call protection

·         Municipals:

o    The front end of the muni curve remains strong and is an excellent place to look for sale candidates in the portfolio

o    As we have ticked back up to recent cycle highs, extending in the municipal sector continues to be a great sector to add spread and quality

o    Taxable supply, especially on Midwest credits, has dropped, pushing spreads slightly lower but still +50-60bps to treasuries on a 15 year high quality GO

·         MBS:

o    As lower rates have been expected, the safe buy has been deep discount and/or low loan balance pools since they have the most prepay protection and still provide excellent spread

§  Low loan balance pools (85k-175k max loan size) are very consistent and have much more
limited refinance risk because there is less incentive to the borrower and as of late have had limited pay up versus generic pools

o    The higher the coupon, the higher the price, the higher the spread, the higher the prepayment risk

§  Higher coupons will be the first to get a massive wave of refinancing when rates fall  

·         DUS / PC:

o    A great bullet alternative

o    5YRs trading at +40-50bps over the curve

o    If at a discount, there can be huge upside if early payoff

o    Great place to find CRA eligible offers as issuance picks up

·         CD’s:

o    Heavy front end issuance

o    Spread has vanished as rates have ticked up in the midst of Fed cuts

Additionally, we are passionate about educating our clients. Look through the archive of our publications – we deliver them to your inbox each week but we keep them here in case you missed something or want to share with an associate.

Detail shared are indications only and are subject to change 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.

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