Sector Update

March 14, 2022

A few points to start your week

See this morning’s Market Today for a quick recap of last week
Yields ended the week drastically higher and the curve shape relatively unchanged
- Inflation concerns seem to have won out over the conflict in Ukraine
- Not that simple though as the conflict itself is inflationary in nature
- Yields up 7-13 bps this morning, market awaits an almost certain 25 bps Fed hike on 3/16
On the back of higher yields, spreads also wider in many sectors looking back 12-months (see Spread Snapshot below)
Posted most recent webinar slides and replays below, “Strategies in an Expected Tightening Cycle”

Individual Sector Updates – Click to Access

Largest weekly movements in yields over the past ten years

Longer MBS spreads look wide by a variety of measures, even when including pandemic volatility

Today – Equities mixed, yields 7-13 bps higher, curve steeper, oil falls

Equities continued downward trend last week

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 ( slides | webinar replay )

3/10 Credit Union: Balance Sheet Strategies in an Expected Tightening Cycle ( slides | webinar replay )

4/12 Bank: Interest Rate Swaps, Not Just for Hedging

4/14 Credit Union: Interest Rate Swaps, Not Just for Hedging

5/10 Bank: Balance Sheet Management and Your Loan Portfolio

5/12 Credit Union: Loan Participation Market Overview

Treasury yields solidly through pre-pandemic levels, Fed and inflation take center stage

Yield on 10-year 15-20 bps above pre-pandemic levels this morning, 5-year approaches 40 bps above

Yield on 3-year 40 bps above pre-pandemic levels this morning, 2-year 25 bps above

Curve Shape – 2s5s 4 bps wider last week, 30 bps flatter YTD through this morning

Curve Shape – 2s10s moves unchanged last week, 50 bps flatter YTD through this morning

Market moves put higher coupons at lower premiums or discounts

What We’re Reading

Market Today | Daily

Weekly Recap | Weekly, Friday

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

Brokered Deposit Rate Indications | Weekly, Monday

Investment Alternatives Matrix | Weekly, Tuesday

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

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

WSJ: The Inflation Hits Just Keep Coming, Raising Stakes for the Fed

“Escalating sanctions by the West to punish Russia for its war against Ukraine are driving fears that an episode of increased inflation, already at its highest levels in 40 years, will become harder to wring out of the U.S. economy without a recession.”

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.