Tuesday, August 11, 2020 |
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| MANAGING DIRECTOR: Scott Carrithers PORTFOLIO SALES AND SERVICE: Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty Kevin Doyle • Lonnie Harris • Mark Tranckino • Robert Schuyler • Tom Toburen Josh Kiefer • Nicole Burczyk • Natalie Regan • Aaron Stoffer • David Farris |
| 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 |
| 08/04/20 | 0.09 | 0.09 | 0.11 | 0.14 | 0.11 | 0.10 | 0.19 | 0.36 | 0.52 | 0.96 | 1.19 |
| 08/05/20 | 0.08 | 0.10 | 0.12 | 0.12 | 0.11 | 0.13 | 0.22 | 0.39 | 0.55 | 1.00 | 1.22 |
| 08/06/20 | 0.07 | 0.10 | 0.11 | 0.14 | 0.11 | 0.13 | 0.21 | 0.39 | 0.55 | 0.98 | 1.20 |
| 08/07/20 | 0.08 | 0.10 | 0.12 | 0.14 | 0.13 | 0.14 | 0.23 | 0.41 | 0.57 | 1.01 | 1.23 |
| 08/10/20 | 0.09 | 0.11 | 0.13 | 0.13 | 0.14 | 0.15 | 0.24 | 0.42 | 0.59 | 1.04 | 1.25 |
Source: U.S. Department of the Treasury, as of 08/10/2020
Just as there are two types of college football coaches – those that HAVE been fired and those that WILL be fired, there are two types of bankers—those that have experienced loan losses due to the COVID-19 pandemic and those that will. Whether it’s commercial real estate, exposure to the energy sector, perhaps a local restaurant that closed or just a consumer loan to someone who lost their job – eventually every loan portfolio is likely to be touched by the pandemic.
With interest rates at historical lows, nearly every item in your bond portfolios should be reflecting a gain. Last Thursday’s Portfolio Managers Report, in fact, focused on various potential sell items in portfolios and the reasons to consider them as candidates.
* U. S. Treasuries (obviously “give-up “ yields are less than 25 basis points inside 5 years).
* Bullet agencies (strong bids, currently with very narrow spreads to treasuries).
* MBS holdings experiencing rapid pre-payments (capture the premium before the homeowner does).
* Municipal bonds (supply is tight, especially for bank qualified, so bids are very strong).
* Municipal bonds (examine any credits and geographic regions with which you may feel uncomfortable).
There should be, however, a legitimate underlying reason for realizing gains. To boost the bottom line by offsetting pandemic related loan losses with investment portfolio gains harvesting would seem to be one of the most valid reasons of all.
Loan Losses and Bond Portfolio Gains
Just as there are two types of college football coaches – those that HAVE been fired and those that WILL be fired, there are two types of bankers—those that have experienced loan losses due to the COVID-19 pandemic and those that will. Whether it’s commercial real estate, exposure to the energy sector, perhaps a local restaurant that closed or just a consumer loan to someone who lost their job – eventually every loan portfolio is likely to be touched by the pandemic.
With interest rates at historical lows, nearly every item in your bond portfolios should be reflecting a gain. Last Thursday’s Portfolio Managers Report, in fact, focused on various potential sell items in portfolios and the reasons to consider them as candidates.
* U. S. Treasuries (obviously “give-up “ yields are less than 25 basis points inside 5 years).
* Bullet agencies (strong bids, currently with very narrow spreads to treasuries).
* MBS holdings experiencing rapid pre-payments (capture the premium before the homeowner does).
* Municipal bonds (supply is tight, especially for bank qualified, so bids are very strong).
* Municipal bonds (examine any credits and geographic regions with which you may feel uncomfortable).
There should be, however, a legitimate underlying reason for realizing gains. To boost the bottom line by offsetting pandemic related loan losses with investment portfolio gains harvesting would seem to be one of the most valid reasons of all.
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