Sector Update

March 21, 2022

A few points to start your week

Individual Sector Updates – Click to Access

Agency Market | Agency MBS | Agency ARM | Agency CMO | Municipal Market | SBA Market

Fed’s tone pushes yields higher, curve flatter – waiting is less (but still) punitive

Today – Equities mixed, yields 13-18 bps higher, oil shoots higher

Equities rallied hard last week, 2022 returns 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 ( 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 2- and 3-year up almost 130 bps Year-to-Date

Yield on 5-year +98 bps and 10-Year +73 bps Year-to-Date

Curve Shape – 2s5s unchanged last week, 32 bps flatter YTD through this morning

Curve Shape – 2s10s 4 bps flatter last week, 56 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, 1st business day

Brokered Deposit Rate Indications | Weekly, Monday

Investment Alternatives Matrix | Weekly, Tuesday

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

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

WSJ: The End of Zero: Prepare for a World With Higher Rates

“Investors looking to bolster returns have funded a bevy of online consumer lenders and mortgage originators that have gone on to take market share away from banks. But those investors may be less keen on funding nonbank lenders if higher interest rates allow them to garner higher returns elsewhere. Old-fashioned banks, which are funded by deposits, should have the advantage since depositors tend not to move money out of the bank just because they can make a bit more lending their money elsewhere.”

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.

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
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