Sector Update

March 22, 2021

Last week was another much like the previous six in regard to curve shape and yield changes. For the seventh straight week, the Treasury curve ended the week steeper with intermediate and longer yields increasing. For those wondering the last time we’ve seen a seven-week run up in yields, using the 10-Year Treasury it looks like the beginning of 2018, but just barely depending on how you handle rounding. For a less subjective seven-week run, you must return to 2009 and 2004 prior to that. It doesn’t appear there has ever been an 8-week run since 2000.

A Few Points to Start Your Week

I want to quickly point you to three things this week. First, we have multiple webinars coming up, see “Upcoming Webinars” below. Second, I’d like to point you towards the CMO Market commentary where cut-coupon CMOs are coming back into focus. Lastly, in the Food for Thought section, I looked back to this time last year when the Fed announced QE “unlimited”.

Higher Yields, Steeper Curve – Week 1 2 3 4 5 6 7

Last week marked the seventh consecutive week the yield curve steepened as intermediate and longer-term yields continued their march higher. However, last week was the first time in this span the NASDAQ CBNK Index posted a decline. The index fell 2.1% last week and is off by another 3.7% this morning. Keeping things in perspective, the index is up 28.7% YTD and up 23.5% since February 1st when this trend began. Depository activity was robust again last week as large amounts of liquidity still exists in the banking system and compounded last week by deposit of additional stimulus funds.

When Will Mortgage Prepays Slow Down?

That’s a great question and one we are hearing more frequently. Mortgage rates have certainly moved up, the 30-year moved +36 bps over the last five weeks to 3.09 and the 15-year has moved +21 bps to 2.40 according to the Freddie Mac PMMS. As we have discussed in the Prepay Commentary it takes time for these to work through though. Robust prepayment models like Yield Book and Bloomberg’s BAM incorporate the movement up in yields and rates and are broadly predicting future slowdowns in refinancing activity.

Upcoming Webinars – (Registration opens 2 weeks prior, 1 hour CPE available)

Bank 3/25: Bank Advisory and Strategic Services Q1 Webinar

Bank 4/13: Libor Update, Are you Ready?

Credit Union 4/15: Libor Update, Are you Ready?

Bond Academy – April 19-22, 8-Session Virtual Conference Series

We are excited to introduce our virtual Bond Academy, an 8-part series designed to provide depository portfolio managers with the basic knowledge needed to help plan and create effective investment portfolios.

For more information, please contact your account representative or email

Bank: 4/19 – 4/22: Two sessions daily at 10:00 am and 1:30 pm Monday through Thursday

Credit Union: 4/19 – 4/22: Two sessions daily at 11:30 am and 3:00 pm Monday through Thursday


Treasury yields are lower from Friday’s close and the curve is slightly flatter. Broad U.S. equity indices are mixed. The NASDAQ Bank Index (CBNK) is off 3.7% after a 2.1% decline last week. It is still up approximately 29% YTD though.

Longer Maturities Moved Higher, Joined by Intermediate, Short-End Stuck, Curve Steepened

10-year yield within 16 bps of where it started 2020, 5-year still off by 80 bps

Yield Curve Shape – Don’t Fear the Steeper

Food for Thought – Looking Back 1 Year Ago This Week

Below is a chart included in this publication a year-ago this week. Early on the morning of March 23rd, 2020 the Fed announced a virtually unlimited Quantatative Easing program. They removed previous purchase caps on Treasury and Agency MBS and clarified that Agency CMBS were also included. I wrote that indiscriminately wider spreads we were seeing at the time was a symptom of illiquidity and was why the Fed stepped in (again) and the net effect of their actions was to attempt to to reduce spreads. No one knew if the Fed would succeed or not, but it would not be from lack of trying. As it turned out, they were quite successful. You can see the year-over-year spread changes below in the Yield and Spread Snapshot.

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 (March) | Monthly, 5th business day

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

WSJ: Stimulus Checks Have Left U.S. Households Ready to Spend

“Households have entered 2021 armed with boatloads of cash—on average—and the cleanest balance sheets they have had in decades. Households finished 2020 with $14.1 trillion combined in checking and savings accounts, compared with $11.4 trillion in 2019, according to Federal Reserve data. Their debt-service burden—the percentage of after-tax income used to pay off debt—fell to its lowest level in records going back to the early 1980s.”

Vining Sparks: Coronavirus Chartbook

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