Sector Update

March 7, 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 | Interest Rate Products

Largest Weekly yield declines over the past 5 years

Longer MBS spreads look wide by a variety of measures, even when including COVID-19 volatility

Today – Equities fall, yields 1-4 bps higher, volatility continues to shake markets

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 (open for registration)

3/10 Credit Union: Balance Sheet Strategies in an Expected Tightening Cycle (open for registration)

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

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

Treasury yields still around pre-pandemic levels except for 10-Year which is apprx. 20bps lower

Yield on 10-year 15-20 bps below pre-pandemic levels this morning, 5-year right at even

Yield on 3- and 2-year +/- 5 bps from pre-pandemic levels

Curve Shape – 2s5s 14 bps flatter last week, 39 bps flatter YTD through this morning

Curve Shape – 2s10s moves 14 bps flatter last week, 55 bps flatter YTD through this morning

March MBS factors released, prepay speeds available – broad declines for 5th month running

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 (February) | Monthly, 5th business day

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

WSJ: U.S. Treasurys Regain Favor

“Aiding the recent bond rally is the fact that yields are retreating from multiyear highs, investors noted. Faced with persistent inflation and a shift in tone from Fed officials, investors in January and February went from predicting about three rate increases this year to seven or more. That hurt both bonds and stocks but also created more room for yields to fall if the growth outlook darkens.”

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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