Sector Update

February 22, 2021



The Treasury curve finished last week steeper by 13 basis points all on moves higher in the 10-year Treasury yield. The 10-year yield has broken through 1.30% as fixed-income and equity investors alike are monitoring the key benchmark rate. Broadly, equities have (and are) suffering a bit on these moves higher but are still up on the year.


Don’t Fear the Steeper

Make sure to check out the visuals below but, save the short-end, there is quite the three-week run up going on in yields. In general, I would say for our depository customers to not “fear the steeper”, it may have some effects on current holdings but in terms of moving forward it should be broadly positive. I think this sentiment is reflected, partly, in the NASDAQ CBNK Index posting a nice return last week and continuing into this morning while more broad indices are struggling.


Positioning Investment Portfolios for Performance

We have webinars scheduled this week on Tuesday (2/23) and Thursday (2/25) about positioning investment portfolios for performance – volatility like we have seen can make it more difficult, but it also brings opportunities. The important thing is keeping priorities straight and considering whether or not an investment supports your overall balance sheet needs.


Click to register and see more info (1 hour of CPE is available)

Bank 2/23: Positioning the Investment Portfolio for Performance

Credit Union 2/25: Positioning the Investment Portfolio for Performance



Today

Treasury yields are virtually unchanged from Friday’s close and broad U.S. equity indices are all down to varying degrees. The NASDAQ Bank Index (CBNK) continues its climb after a 3.2% increase last week. At a minimum, it will be interesting this week to see if the 3-week (and counting?) increase in yields will stick. The 5- and 10-year are now up approximately 16 and 27 bps respectively over that timeframe. Volatility could continue this week as there are a number of economic releases slated and Jay Powell will give testimony before Congress Tuesday and Wednesday.


Longer Maturities Moved Higher Last Week, Short-End Stuck, Curve Steepened


Yield Curve Shape – Don’t Fear the Steeper





Bond Index Returns – February tough month so far


Equity Returns – So far, February good for all, especially the CBNK Index


Sector Commentary (click on links for more in-depth look)



What We’re Reading


Market Today | Daily

Weekly Recap | Weekly, Friday

Brokered Deposit Rate Indications | Weekly, Monday

Investment Alternatives Matrix | Weekly, Tuesday

MBS Prepay Commentary (February) | Monthly, 5th business day

SBA Prepay Commentary (February) | Monthly, 10th business day


WSJ: Inflation Problems Depend on Where You Look for Them

“The Fed defines its inflation target in terms of consumer prices, such as those we pay for cars, toothpaste and haircuts. But in recent decades, prices have often climbed much faster for investment assets, such as homes and stocks, and twice led to booms and busts followed by recessions.”


Freddie Mac: Mortgage Rates Move Up

Freddie Mac reported in their February 18th Primary Mortgage Market Survey (PMMS) that 15- and 30-year fixed rate mortgage rates moved up 2 and 8 bps to 2.21 and 2.81 respectively.


Vining Sparks: Coronavirus Chartbook


Regulatory Links

FHFA: 2/9 FHFA Extends Foreclosure and REO Eviction Moratoriums and COVID Forbearance Period

Federal Reserve: 2/12 Hypothetical scenarios for its 2021 bank stress tests

FDIC: 1/19 FDIC Approves Rule on the Role of Supervisory Guidance

Treasury: 1/8 SBA and Treasury Announce PPP Re-Opening; Issue New Guidance

FHFA: 12/23 FHFA Extends COVID-19 Multifamily Forbearance through 3/31/2021

FDIC: 12/16 FDIC Releases New 2020 Community Banking Study

Federal Reserve: 11/30 Statement on LIBOR Transition


LIBOR Transition Links

ARRC 12/18: FAQs — Updated 12/18/2020

ARRC 12/4: ARRC Releases Guide and Highlights New ISDA Webinar on USD LIBOR Endgame Developments

ARRC 11/30: ARRC Applauds Major Milestone in Transition from U.S. Dollar LIBOR

ARRC 9/30: August – September ARRC Newsletter

ARRC 8/27: Recommended Hardwired Fallback Language for Bilateral Business Loans

ARRC 8/18: Transition Resource Guide for ARM and Private Student Loans

ARRC 8/7: ARRC Releases the SOFR Starter Kit

ARRC: Link to all ARRC Announcements

ARRC: Link to all ARRC Publications

ARRC: Link to ARRC Fallback Contract Language

Fannie Mae: LIBOR Transition Webpage

Freddie Mac: LIBOR Transition Webpage


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