Sector Update

January 24, 2022

A few points to start your week

Yields peaked mid-week but turned lower and curve flatter, continuing trend today
Check out this morning’s Market Today for a quick recap of last week
Mark your calendars for upcoming webinars, next scheduled is February 22^nd(more info below)
Fed meeting this week seems to have markets on pins and needles, volatility markedly higher
MBS activity strongest in 20- and 30-year, higher coupons garnering more attention
Municipal bond funds posted outflows for first time in 46 weeks

Individual Sector Updates – Click to Access

Today – Yields lower, curve slightly flatter, equities continue broad decline

Treasury yields dip off cycle highs prior to Fed meeting

Summary of Economic Releases

Equities struggle to digest prospects of higher rates, banks relatively better by large gap

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

Yield on 10- and 5-year maturities remain close to pre-pandemic levels

Yield on 3- and 2-year maturities still lag pre-pandemic levels

Curve Shape – 2s5s moves flatter, still 6 bps steeper YTD

Curve Shape – 2s10s moves flatter, still 4 bps steeper YTD

Food for Thought – SBA 7(a) prepays continue to grind back towards historical norms

What We’re Reading

Market Today | Daily

Weekly Recap | Weekly, Friday

Monthly Review (December) | Monthly, 1^st business day

Brokered Deposit Rate Indications | Weekly, Monday

Investment Alternatives Matrix | Weekly, Tuesday

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

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

WSJ: Fed Steps Up Deliberations on Shrinking Its $9 Trillion Asset Portfolio

“Fed Chairman Jerome Powell and several colleagues have indicated such a turn from expanding the portfolio to contracting it is likely to be measured in months and not years this time around.”

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 Interest Rate Products: Margin Compression: Causes and Solutions

In this article, we examine why the industry is facing margin compression, challenge some of the more prevalent assumptions about banks’ risks profiles and highlight our best ideas for dealing with the current environment.

Vining Sparks: Coronavirus Chartbook and Coronavirus State Charts