TIB Ticker - Our Capital Markets Philosophy

January 18, 2013Daily Rates & Viewpoints From the Officers & Staff of TIB.

Our Capital Markets Philosophy

As I transition from the role of fixed income trader to an investment officer here with TIB’s Capital Markets group, I’ve been constantly evaluating what I’ve learned over the years and how I can best utilize those skills to help our customers going forward. Our Capital Markets group is small by comparison to some of our competitors, but that also keeps our overhead lower than theirs. Plus, each and every one of us brings several valuable attributes and a wealth of knowledge to the table. I’ve been lucky enough to learn an immense amount while trading for and working with our officers, and I’d thought I’d share a little of that with you.

I want to start by saying that although I have been the fixed income “trader” for a number of years, the word “trader” isn’t necessarily the best to describe the role. Here at TIB, we don’t typically inventory any positions, and as the trader, I would not manage positions in order to realize a profit for the bank directly, as would most traders at other bond shops, both regionally and in New York. With all the instantaneous information available this day and age, TIB has determined diminishing reasons to inventory bonds. We run a matched book, meaning every position shown to our customers as a potential investment option is handpicked to fit the particular need. We are in touch with hundreds of firms that inventory fixed income positions, and so their inventory effectively becomes our inventory. Thus, there is no incentive for us to show a position that might not be the best for our customer simply because we own it. We work for your best interests.

That being said, the trader role does take on a different feel as a good portion of bonds available are not owned by one shop. Many times, you can find matching or very similar positions being held by multiple shops, and those can be priced very differently, depending on a variety of things. My job was to always make sure and find the best offer for our investment officers, and then ultimately our customers. That’s something that we feel sets TIB apart from others in the market.

Our Capital Markets group is conservative by nature. We feel by actively looking for the most competitively priced offerings of high quality products, rather than “chasing yield” with products that trade in thin markets, we can help position our customer’s portfolios to provide strong yield, remain well positioned for any rate environment and to provide liquidity if and when needed. A bank’s risk should mostly be on the lending side, not in their bond portfolio, even given Dodd-Frank’s requirement to review our municipal positions as if they’re part of our loan portfolio.

We are also closely tied to all areas of the bank – Lending, Mortgage, Credit Cards – which gives us a bigger picture of what’s affecting our customer banks across a wide variety of topics. While that doesn’t necessarily change our recommendation for our customer’s Capital Markets needs, it is good to be in touch with those areas regularly in case there are any important developments to discuss. There are a lot of firms out there that can offer fixed income investments, but with all the products and services TIB can help with, we hope to truly be your bank’s partner across the board.

Our group has over has over 100 years of Capital Markets experience among us, and a variety of different skill sets we utilize as a team to best serve our customers. We’re here to help your bank with any of your Capital Markets needs as your “trusted partner”. Please give us a call at 800-374-4842, we’d love to hear from you!

Reed Bateman Reed Bateman
Vice President-TIB Capital Markets
rbateman@mybankersbank.com

Market Levels @ 9:55 AM CST

TIB Fed Funds & MMDA Rates - Previous Day
Agent	0.20%	Prin	0.05%	MMDA	0.30%
Agent	0.20%	STAR Prin	0.10%	STAR MMDA	0.35%

Key Indices/Commodities
1 - Month LIBOR	0.20%	Dow Jones	13589.20
3 - Month LIBOR	0.30%	NASDAQ 100	3124.40
1-Yr LIBOR	0.80%	S&P 500	1473.50
1-Yr CMT	0.14%	Spot Gold	1686.30
Prime	3.25%	Spot Silver	31.77
3-yr LIBOR Swap/Offer	0.51%	Spot Crude Oil	95.31
5-yr LIBOR Swap/Offer	0.90%	CRB Index	300.33
3 Mo - Fed Fund Futures	0.13%	6 Mo - Fed Fund Futures	0.13%

US Treasury Yields		US Non-Callable Agency Yields
Yield	Maturity	Yield	Spread
0.00%	90 - Days
0.00%	180 - Days
0.20%	2 - Year	0.27%	7bp
0.33%	3 - Year	0.37%	4bp
0.73%	5 - Year	0.88%	15bp
1.82%	10 - Year	1.96%	14bp
3.01%	30 - Year
162 BPs		Yield Curve(2's-10's)

Sample 1x Callable Agency Issues
Description	Call Date	YTC	YTM
FNMA 1.55 07/30/20	1/15	1.56%	1.56%

Select MBS Levels
Description	Coupon	Yield	Spread/Duration*
15-Yr FNMA	3.00%	1.34%	84 / 3.45
30-Yr GNMA	3.50%	2.13%	88 / 6.01
*Duration @ 12 month Historical CPR

Morning Commentary:	Blake Scharlach
The only economic data this morning is the University of Michigan Consumer Confidence Index, which came in at 71.3, which was far lower than the projected 75.0. Last month’s number was 72.9.We’re starting to see signs that we’re going to have a repeat of August 2011, when our last major debt-ceiling congressional debacle made investors flock to US Treasuries, which was a fine bit of irony. After the US was downgraded to AA by S&P, investors saw a need for safety – and despite its downgrade, the US Treasury remained and still remains the safest and most liquid investment in the world. Now that the debt ceiling fight is on the horizon, we’re starting to see some downward pressure on the curve again. If our legislators live up to their current reputation – and send us to the brink – again – we’re likely to continue to see heavy demand in treasuries. Since it’s a slow news day, I’d like to share one little anecdote – recently we’ve seen a few AAA-rated municipal securities that are pre-refunded – and the pre-refunding is collateralized by US Treasuries. As a result of the pre-refunding, the bonds’ rating actually falls to AA to reflect the rating of the collateral. Where we traditionally see pre-refundings as a guarantee of payment, now we’re occasionally seeing them as a downgrade-able event! In the first hour of trading, the Dow is up 10 and the 10 year yield is 1.85%.

Morning Commentary:

Blake Scharlach

The only economic data this morning is the University of Michigan Consumer Confidence Index, which came in at 71.3, which was far lower than the projected 75.0. Last month’s number was 72.9.We’re starting to see signs that we’re going to have a repeat of August 2011, when our last major debt-ceiling congressional debacle made investors flock to US Treasuries, which was a fine bit of irony. After the US was downgraded to AA by S&P, investors saw a need for safety – and despite its downgrade, the US Treasury remained and still remains the safest and most liquid investment in the world. Now that the debt ceiling fight is on the horizon, we’re starting to see some downward pressure on the curve again. If our legislators live up to their current reputation – and send us to the brink – again – we’re likely to continue to see heavy demand in treasuries. Since it’s a slow news day, I’d like to share one little anecdote – recently we’ve seen a few AAA-rated municipal securities that are pre-refunded – and the pre-refunding is collateralized by US Treasuries. As a result of the pre-refunding, the bonds’ rating actually falls to AA to reflect the rating of the collateral. Where we traditionally see pre-refundings as a guarantee of payment, now we’re occasionally seeing them as a downgrade-able event! In the first hour of trading, the Dow is up 10 and the 10 year yield is 1.85%.

Information contained herein is based on sources we believe to be reliable but its accuracy is not guaranteed. Customers should rely on their own outside counsel or accounting firm for specific circumstances. The securities, yields or levels discussed herein are for illustration purposes and are not guaranteed, not obligations of any bank, thrift or other entity and are not insured by the FDIC.

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