Sector Update | ![]() |
February 28, 2022
A few points to start your week
- Yields ended the week higher and the curve as flat as its been, headed downward, since 2018
- Volatility in markets remains elevated as inflation and foreign affairs grapple for attention
- Yields down significantly this morning, volatility continues to offer opportunities
- 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
- Spreads significantly wider across most sectors looking back 12-months (see Spread Snapshot below)
- Areas of activity last week included
- Agencies: most activity in 2-5 year area, spreads attractive in comparison to some sectors
- MBS + CMO: 15-Year 1.00s, 2.50s and 20-Year 2.50s active, cut 2.5 and 3.0 coupons in CMOs
- CMBS: discount GNMA Project Loans and 10-year DUS most popular
- Munis: even across 2-5 coupons, higher coupons slightly more popular
- Corps: new issue quiet, most activity in 4-5 year maturities
- Mark your calendars for upcoming webinars, registration open for next in series (see below)
Individual Sector Updates – Click to Access
Agency Market | Agency MBS | Agency ARM | Agency CMO | Municipal Market | SBA Market | Interest Rate Products
Today – Equities fall, yields 8-12 bps lower, volatility continues to rattle markets
Equities rebounded late last week but have since turned back down
Late February rally helping bond returns but still struggling
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 ( slides | webinar replay )
2/24 Credit Union: Positioning the Investment Portfolio for Performance ( slides | webinar replay )
3/8 Bank: Balance Sheet Strategies in an Expected Tightening Cycle (open for registration)
3/10 Credit Union: Balance Sheet Strategies in an Expected Tightening Cycle (open for registration)
4/12 Bank: Interest Rate Swaps, Not Just for Hedging
4/14 Credit Union: Interest Rate Swaps, Not Just for Hedging
Treasury yields hang around pre-pandemic levels
Yield on 10-year back below pre-pandemic levels this morning, 5-year hanging in
Yield on 3-year right at pre-pandemic levels, 2-year turns lower after hitting even on Friday
Curve Shape – 2s5s 5 bps flatter last week, 24 bps flatter YTD through this morning
Curve Shape – 2s10s moves 7 bps flatter last week, 36 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
WSJ: Russia-Ukraine War Risks Putting Fed in Bigger Bind
“Officials will see two important data releases before their next meeting: the February employment report, due this Friday, and the February consumer-price index report on March 10. Further signs of an overheating job market or an acceleration in price pressures—without a further intensification of market disruptions from the conflict in Ukraine—could renew a debate over whether to raise rates by a half point in March.”
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.