Sector Update

June 28, 2021

Treasury yields ended last week solidly higher across the curve in a steeper move. Short and intermediate yields moved in a less dramatic fashion than the week prior and were 1-4 bps higher. Maturities 7-years and longer moved 7-13 bps higher. Last week, among numerous other Fed speakers, saw taper discussions early on Monday morning with comments from the Fed’s Bullard and Kaplan.

Bullard: could easily argue “at any time” that the economy has made the “substantial further progress” necessary to taper bond purchases. However, officials are “only now starting” those discussions and that it “will take some time to get that organized….”

Kaplan: would prefer tapering “sooner rather than later”

It seems the consensus among Fed officials is that they’re on board with higher current inflation being transitory. At the same time, more are acknowledging risk to the upside. It makes sense then that talks of tapering are becoming more public.

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Today – Yields retreat from Friday, curve flatter, stocks mixed

Yields end week higher – led by longer maturities in a move steeper

5-year yield closed at second highest level of the year

Yield Curve Shape – 2s-5s remains in recent ranges, 2s-10s pushes back but still under pressure

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 (June) | Monthly, 5th business day

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

WSJ: Fed Officials Debate Scaling Back Mortgage-Bond Purchases at Faster Clip

“Other Fed officials argue against the idea, saying the combined purchases of mortgage and Treasury securities lower long-term interest rates overall—not just mortgage rates. They say other factors are contributing to the hot housing market, including a dearth of homes for sale relative to strong demand.”

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