Capital Funding Compass August 2023

June / July saw no new reported Capital Markets transactions in the community bank subordinated debt market. With one more bank failing in July, Heartland Tri-State Bank, potential investors are going to be extremely cautious in their evaluation and purchase of bank debt and are closely watching the price movements in the regional bank index (KRE), and pricing in bank issued debt in the secondary markets, which is active. Regardless of pricing and low activity, some items that investors will still be focusing on are credit quality, loan and deposit concentrations, adverse impact of negative AOCI on balance sheet (Tangible Common Equity), percentage of uninsured deposits, and contingency funding levels. For assistance in positioning your bank properly in these areas, please feel free to reach out to us and we will have a member of our Performance Management Group arrange an initial consultation.

We are seeing some transactions in the bank M&A space, but it is unclear at this time when the bank sub-debt market will be active and healthy enough to re-emerge. Our team is watching the markets and announcements closely and will keep our clients up to date on any new developments.

Additional Resources

CU Funding Compass Week of May 22, 2024

Treasury yields rise as investors digest Fed speaker comments. Several Fed officials urged patience when it comes to rate cuts as inflation remains above the central banks 2% target range. Fed Governor Christopher Wallace said he would like to see more good data on the inflation front before lowering rates. Share Certificate issuance has increased…
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Deposit Funding Compass Week of May 22, 2024

Treasury yields rise as investors digest Fed speaker comments. Several Fed officials urged patience when it comes to rate cuts as inflation remains above the central banks 2% target range. Fed Governor Christopher Wallace said he would like to see more good data on the inflation front before lowering rates. CD issuance has increased roughly…
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Deposit Funding Compass Week of May 16, 2024

A measure of underlying US inflation cooled in April for the first time in six months, a small step in the right direction for Federal Reserve officials looking to start cutting interest rates this year. The core consumer price index, which excludes food and energy costs, increased 0.3% from March, according to government data out…
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CU Funding Compass Week of May 8, 2024

Economic data is taking a bit of a breather this week after the onslaught of last week, culminating in what can be described as “bad news is good news” with the weak jobs report.  Yields retreated from this year’s high water mark under the hope that a softening labor market could still spur the Fed…
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Deposit Funding Compass Week of May 8, 2024

Economic data is taking a bit of a breather this week after the onslaught of last week, culminating in what can be described as “bad news is good news” with the weak jobs report.  Yields retreated from this year’s high water mark under the hope that a softening labor market could still spur the Fed…
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Deposit Funding Compass Week of May 2, 2024

In a widely expected move, the U.S. central bank kept its benchmark short-term borrowing rate in a targeted range between 5.25%-5.50%. The federal funds rate has been at that level since July 2023, when the Fed last hiked and took the range to its highest level in more than two decades. The rate-setting Federal Open…
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Deposit Funding Compass Week of April 24, 2024

Treasuries hold small losses during US morning ahead of record $70 billion 5-year note sale at 1pm EST. Much of this week’s focus will be on data, particularly GDP tomorrow, along with PCE on Friday. If the PCE report on Friday comes in hot we expect to see a reaction in our market, with rates…
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Deposit Funding Compass Week of April 17, 2024

Federal Reserve Chair Jerome Powell is making waves for his contemporaries around the world as the prospect of higher-for-longer US interest rates reduces room for policy easing elsewhere. Powell on Tuesday signaled the Fed will wait longer than previously anticipated to cut borrowing costs following a series of surprisingly high inflation readings — marking a…
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CU Funding Compass Week of April 17, 2024

Federal Reserve Chair Jerome Powell is making waves for his contemporaries around the world as the prospect of higher-for-longer US interest rates reduces room for policy easing elsewhere. Powell on Tuesday signaled the Fed will wait longer than previously anticipated to cut borrowing costs following a series of surprisingly high inflation readings — marking a…
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Deposit Funding Compass Week of April 10, 2024

US inflation topped forecasts for a third straight month (Core CPI + 0.4% MoM), ushering a fresh wave of price pressures that will likely delay any Federal Reserve interest-rate cuts until later in the year. Treasury yields and the dollar jumped while S&P 500 index futures tumbled. The 10yr UST yield traded through the psychological…
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