| Friday, November 17, 2023 |
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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 |
| 11/10/23 | 5.37 | 5.40 | 5.48 | 5.38 | 5.06 | 4.84 | 4.68 | 4.71 | 4.65 | 4.97 | 4.76 |
| 11/13/23 | 5.39 | 5.42 | 5.48 | 5.37 | 5.03 | 4.81 | 4.66 | 4.69 | 4.64 | 4.96 | 4.75 |
| 11/14/23 | 5.38 | 5.39 | 5.41 | 5.23 | 4.83 | 4.59 | 4.43 | 4.47 | 4.44 | 4.81 | 4.62 |
| 11/15/23 | 5.38 | 5.41 | 5.43 | 5.27 | 4.91 | 4.67 | 4.51 | 4.55 | 4.53 | 4.89 | 4.69 |
| 11/16/23 | 5.38 | 5.40 | 5.40 | 5.23 | 4.83 | 4.58 | 4.42 | 4.45 | 4.43 | 4.81 | 4.61 |
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 11/16/2023.
The Decision Matrix
The 2 year vs 10 year (2/10) US Treasury yield inversion has long been a key indicator used to anticipate recession. The last five times the 2/10 inversion occurred, the spread remained negative from 0.9yrs to 1.85yrs before normalizing. Each time it normalized with rates going lower as the Fed cut interest rates.
Source: Bloomberg
This same 2/10 curve has now been in a sustained inversion since July 2022 (~1.5yrs) which would indicate, if history repeats itself, the Fed is at or near the end of its hiking cycle. The high in nominal yields likely occurred in Oct 2023 as we are now over 50bps lower on the 10yr UST since mid-October.
Source: Bloomberg
It is important to understand the impact to your balance sheet when the curve begins to normalize. The decision matrix below provides guideposts to consider on how to position your overall balance sheet, keeping in mind we are still at a +2 standard deviation across the curve. Over the last 2-4 weeks we have seen a noticeable pickup in tax loss bond swaps, balance sheet repositioning and discussion on how to position a banks assets liability profile. These actions can take place either before year end or at the start of 2024.
Please reach out to your Country Club Bank representative if you would like to discuss balance sheets strategies in greater detail.
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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