Sector Update

March 28, 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 for the third week in a row
- Inflation and the Fed are driving the narrative, along with Ukraine
- Curve behavior looks consistent with lower growth and higher inflation, a tough combination
On the back of higher yields, spreads look attractive in many sectors looking back 12-months (see Spread Snapshot)

Individual Sector Updates – Click to Access

Today – Equities down, curve flatter, oil drops 5.6%

Equities continue bounce off mid-March lows 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 move markedly higher, curve flatter to begin 2022

Yield on 2- and 3-year cross through 150 bps of increases for 2022

Yield on 5-year +127 bps and 10-Year +92 bps Year-to-Date

Curve Shape – 2s5s wider last week, 6 bps flatter this morning

Curve Shape – 2s10s unchanged last week, 8 bps flatter 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 (March) | Monthly, 10^th business day

WSJ: Yield Curve Almost Flashes Recession, Maybe, but Who Knows When

“The current yield-curve focus is on the U.S., but Europe, and especially Russian-energy-reliant Germany, is regarded by economists as more at risk of an imminent recession. If the yield curve is a good indicator, Germany will be fine, since the curve has steepened, not inverted, since the Ukraine invasion.”

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.