The Shield: A Special Market Update Edition II

 

Just over a week ago within an article like this I indicated that interest rates have never been lower. That was true then and became true again a few times over the following days. But what was fascinating over the last week even more than the absolute low level of rates has been the extraordinary volatility in the interest rate markets, just as much as the equity markets. A week ago today, the entire U.S. treasury curve closed with yields below 1%, meaning the 10-year treasury rate of 0.541% and 30-year treasury rate of 0.995% were each 80-95 bps below their previous all-time lows. Further, on that same day the 10-year treasury rate was trading in the low 30 bps range, meaning we were just over 30 bps away from negative rates in the U.S. These are indeed incredible times.

Later during the week we witnessed some market correction. Both taxable and tax-exempt yield curves have rebounded higher, though each remain extraordinarily low by historical standards. The tax-exempt yield curve in particular bounced sharply off its historical lows with the benchmark 30-year MMD index rising by 28 and 50 bps, respectively, each of the last two days. The following chart demonstrates the market volatility that has occurred over the last two weeks:

 

 

As a reminder and as discussed in last week’s special market update, borrowers are finding unique opportunities to secure low long-term financing rates and hedge their interest rate risk through a myriad of alternatives. We encourage you to contact us to evaluate the current market and strategies that may benefit your institution.

To learn more about HedgeStar and our services please visit: https://www.hedgestar.com/ 

To schedule a meeting with us please reach out to: 

John Trefethen 
Director & Co-Founder 
952-746-6040
jtrefethen@hedgestar.com

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