Sector Update

September 13, 2021



The yield curve steepened for the third straight week last week. Yields moved up in the belly of the curve while they were unchanged elsewhere. Maturities from 3- to 10-years moved up 2-4 bps while other maturities, longer and shorter, were unchanged. Last week was interesting in that, as the week opened, yields moved 4-5 bps higher on Tuesday; meanwhile, stocks struggled – a theme that lasted all week. The S&P and Dow closed lower each day last week ending down 1.7% and 2.2% respectively.



The backdrop for last week was relatively slow from an economic perspective. On Wednesday, the JOLTs report jumped, somewhat surprisingly, to 10.9 million. When you consider unemployment was 8.7 million during the same time frame, the gap of 2.2 million people seems astounding. I thought it’d be interesting to see what this has looked like historically. The gap is certainly outside the historical norm, but it doesn’t look so out of line with more recent history leading up to the pandemic.



Upcoming Webinars – (1 hour CPE available)

9/14: Bank Municipal Market Update: Investment Strategies and Credit


Today – Yields lower, curve slightly flatter, equities largely positive


Curve ends week slightly steeper


Yields on 5- and 10-year continued their grind higher last week



Yield Curve Shape – 2s-5s remains above 20-day MA, 4 bps steeper last week


Yield Curve Shape –2s-10s remains through 20-day Mov Avg, 2 bps steeper last week


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 (September) | Monthly, 5th business day

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


WSJ: Democrats Release Details of Proposed Tax Increase

“In several areas, the committee proposed tax increases that weren’t as far-reaching as the Biden administration. It didn’t include a provision opposed by banks that would have required annual reporting on account flows to the Internal Revenue Service. The House plan doesn’t change the income-tax rules that allow unrealized capital gains to go untaxed at death. Rural Democrats had opposed that administration capital-gains plan, and its chances of becoming law are looking slimmer.”


Vining Sparks: Strategic Insight: Price Volatility on Tax-Free Municipal Bonds

Have you ever wondered why the price volatility you see on tax-free municipal bonds is less than comparable taxable bonds? At Vining Sparks, we consider taxes when measuring interest rate risk on tax-free municipal bonds. The rationale is simple: taxes matter. In this Strategic Insight, we look at the implications of ignoring taxes and why we think it makes sense to consider them.


Vining Sparks: MBS & Prepayment Update

This presentation looks back over 2021 and how different prepay models have performed so far this year. It is always important, but especially in this environment, that robust prepayment assumptions are used. We also make note that Yield Book is scheduled to release a model update and provide some background and comparisons.


Vining Sparks: Loan Trading: Auto Market Analysis

Auto loans continue to be a large part of our customers’ loan portfolios and a participation class that remains in favor. It is important to stay abreast of market changes in rates and potential credit concerns that may be creeping in that could impact production and performance.


Vining Sparks: Strategic Insight: New SBA 504 Debt Refinancing Program

The SBA recently published a rule implementing section 328 of the Economic Aid Act. Section 328, titled Low-Interest Refinancing, revises the requirements for refinancing debt with an SBA 504 Loan. The net effect of these revisions points towards greater ease and availability for certain borrowers, who were previously disallowed, to refinance using an SBA 504 loan.


Vining Sparks: Strategic Insight: CU Risk-Based Capital Update

After having been delayed multiple times, the NCUA’s risk-based capital provisions finalized in 2015 (2015 Final RBC Rule) are currently scheduled to go into effect January 1, 2022. The 2015 Final RBC Rule only applies to federally insured credit unions with assets greater than $500 million. Institutions with less than $500 million in assets are exempt from the 2015 Final RBC Rule.


Vining Sparks: Coronavirus Chartbook and Coronavirus State Charts


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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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