July 26, 2013Daily Rates & Viewpoints From the Officers & Staff of TIB.

Where Do We Go From Here?

We all have felt the effects of recent decline in the value of our securities portfolio, so it begs the question... Will interest rates come back down so the values of our portfolios will recover or will rates continue to rise as the Fed begins to taper the bond buying program?  The other question that seems to fall right behind that one is... who will be the next Fed Chairman? Well, the short answer is-- no one knows, but we can always speculate!

It is expected over the next few months, the Obama administration will announce a replacement for Chairman Bernanke. A number of names have been thrown around the past few months that include Timothy Geithner, Richard Fisher and Roger Ferguson, but two names seem to have risen to the top-- Fed Vice Chairman Janet Yellen and former Treasury Secretary Larry Summers.
According to some, Mr. Summers may have a key advantage in the fact that President Obama knows and likes him. The President also tends to surround himself with ex-colleagues, which Summers is and Yellen is not. Another potential negative for Fed Vice Chairman Yellen, who is a highly accomplished economist, is her fairly dovish stance on monetary policy.
While her public stance has been consistent with the FOMC majority, some in the Obama administration may view her dovish statements of the past as a potential for what is sure to become a contentious confirmation process. Hence, the reason the most recent bet has been on Larry Summers.
As for interest rates on securities, the lack of market volatility of late seems to indicate market participants are anxiously awaiting the next FOMC meeting on July 30th and 31st. They want to hear if Chairman Bernanke will continue purchasing $85 billion a month in Treasuries and MBS or begin the tapering process sooner than late.  However, the one thing the market might be missing is the possibility the Chairman might very well increase his purchases, as he indicated in his most recent visit to Capitol Hill.
As for now, I expect the market to remain around its current levels until they get a chance to see the “whites of the Feds eyes” again.

Todd Wentz Todd Wentz
Sr. Vice President/ TIB Capital Markets

Market Levels @ 7:10 AM CDT

TIB Fed Funds & MMDA Rates - Previous Day
Agent 0.20% Prin 0.05% MMDA 0.30%
STAR Prin 0.10% STAR MMDA 0.35%
Key Indices/Commodities
1 - Month LIBOR 0.18% Dow Jones 15555.61
3 - Month LIBOR 0.26% NASDAQ 100 3605.18
1-Yr LIBOR 0.67% S&P 500 1677.30
1-Yr CMT 0.12% Spot Gold 1323.50
Prime 3.25% Spot Silver 19.92
3-yr LIBOR Swap/Offer 0.76% Spot Crude Oil 104.60
5-yr LIBOR Swap/Offer 1.54% CRB Index 285.50
3 Mo - Fed Fund Futures 0.11% 6 Mo - Fed Fund Futures 0.12%
US Treasury Yields US Non-Callable Agency Yields
Yield Maturity Yield Spread
0.00% 90 - Days    
0.00% 180 - Days    
0.26% 2 - Year 0.36% 10bp
0.55% 3 - Year 0.69% 14bp
1.34% 5 - Year 1.50% 16bp
2.53% 10 - Year 3.06% 53bp
3.59% 30 - Year    
227 BPs Yield Curve(2's-10's)
Sample 1x Callable Agency Issues
Description Call Date YTC YTM
FHLMC 1 11/22/16 8/14 1.00% 1.00%
Select MBS Levels
Description Coupon Yield Spread/Duration*
15-Yr FNMA 3.00% 2.02% 126 / 3.19
30-Yr GNMA 3.50% 3.03% 164 / 4.38
*Duration @ 12 month Historical CPR
Morning Commentary: David Terrell

Treasury prices are little changed this morning after closing up slightly yesterday.  The 10 year yield is right in the middle of its trading range of 2.45%-2.60%.  Soaring equity prices and an improved housing market led to a better than forecast consumer confidence report.  Across the pond, Greece received more aid from the EU; then immediately asked for more aid.  China manufacturing slowed down, as well.  US mortgage refinancings continue to slow down and are at a 2 year low.  It is about 17% below its 10-year average. 

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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