Sector Update |  |
February 22, 2022
A few points to start your week
- Yields reversed early week increases as the Ukraine situation turned more serious as the week progressed
- Volatility in markets remains elevated as inflation and foreign affairs grapple for attention
- Increases in benchmark yields have eroded gains in portfolios (see tables below)
- Strategic Insight: HTM and Other Alternatives: Strategies for Managing Exposure to Rising Rates
- See this morning’s Market Today for a quick recap of last week
- No individual Sector Updates this holiday-shortened week
- Mark your calendars for upcoming webinars, registration open for next in series (see below)
Today – Equities broadly off, curve pushing flatter led by short-end
Upcoming Webinars – (1 hour CPE available, registration opens 2 weeks prior to each webinar)
1/11: 1st Quarter Economic Outlook Webinar (slides | webinar replay)
2/22 Bank: Positioning the Investment Portfolio for Performance
2/24 Credit Union: Positioning the Investment Portfolio for Performance
3/8 Bank: Balance Sheet Strategies in an Expected Tightening Cycle
3/10 Credit Union: Balance Sheet Strategies in an Expected Tightening Cycle
Treasury yields soar pushing yields above pre-pandemic highs
Yield on 10- and 5-year maturities remain through pre-pandemic levels
Yield on 3-year moves above pre-pandemic levels, 2-year on the cusp
Curve Shape – 2s5s unchanged last week, 21 bps flatter YTD through this morning
Curve Shape – 2s10s moves 3 bps wider last week, 37 bps flatter YTD through this morning
What We’re Reading
Market Today | Daily
Weekly Recap | Weekly, Friday
Monthly Review (January) | Monthly, 1st business day
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
“Investors have pulled a net $6.7 billion from municipal-bond funds so far this year, according to Refinitiv Lipper, the most sustained outflows since March and April 2020, when early-pandemic shutdowns left investors panicked that cities and towns would struggle to pay bills.”
Vining Sparks: Strategic Insight: HTM and Other Alternatives
The recent increase in interest rates and discussion of the Fed paring back its QE measures has caused many depository institutions to focus on their exposure to earnings and capital from rising interest rates. There are three primary areas where exposure to rising rates is most easily quantifiable: in net interest income simulations, in economic value of equity (EVE) simulations, and in projected price volatility for the investment portfolio. For institutions beginning to encounter exposure to higher rates, there are several strategic options available to reduce interest rate risk.
Vining Sparks: Loan Trading: Consumer Lending
It is important to stay abreast of market changes in rates and potential credit concerns that may be creeping in that could impact production and performance. We welcome the opportunity to assist you in evaluating your portfolio for areas of opportunity or provide additional color on this dynamic market.
Vining Sparks: Coronavirus Chartbook and Coronavirus State Charts