Deposit Funding Compass Week of December 14, 2023

Market Commentary: The FOMC left its policy rate unchanged yesterday at 5.25%-5.50%, as expected, but the totality of Fed communication was dovish enough to spur a significant bond rally throughout the afternoon. 2s fell almost 30bp by the end of trading, 5s fell below 4.00% for the first time since July, and 10s fell to 4.01% for the first time since early August. The entire Treasury curve is an additional 5-10bp lower so far in overnight trading as well. While the message from Chair Powell was that future rate hikes are still on the table, it’s fair to characterize yesterday’s meeting as a pivot point for this rate cycle.

Brokered CD funding levels are doing their best to adjust to the volatility in rates though its not a lock-step move and more often than not carries a bit of a lagging effect.  Buy-side expectations can take time to recalibrate and get past the “sticker shock” of considerably lower coupons. Supply will contribute heavily to where levels ultimately land and how successful these indications are, for the time being we are looking to price aggressively and reset CD market funding.

Additional Resources

Deposit Funding Compass Week of February 29, 2024

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CU Funding Compass Week of February 29, 2024

The US economy expanded at a slightly slower rate at the end of last year as a downward revision to inventories masked stronger household spending and investment. GDP rose at a revised 3.2% annualized pace in the fourth quarter, compared with a prior estimate of 3.3%. Consumer spending advanced at a 3% rate. Inflation was revised higher. The Federal Reserve’s…
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Deposit Funding Compass Week of February 22, 2024

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CU Funding Compass Week of February 22, 2024

The Treasury options market is sending bearish signals and bond traders are bracing for the risk of a renewed selloff, driving a surge of trading targeting higher yields and prompting investors to unwind long positions by the most in nearly two years. The trend gained momentum this week, when there was strong demand for contracts…
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Deposit Funding Compass Week of February 14, 2024

US consumer prices jumped at the start of the year, tempering hopes for a continued drop in inflation and likely delaying any Federal Reserve interest-rate cuts. The core consumer price index, which excludes food and energy costs, increased 0.4% from December, more than expected and the most in eight months. Treasury yields jumped (5yr T’s…
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CU Funding Compass Week of February 14, 2024

US consumer prices jumped at the start of the year, tempering hopes for a continued drop in inflation and likely delaying any Federal Reserve interest-rate cuts. The core consumer price index, which excludes food and energy costs, increased 0.4% from December, more than expected and the most in eight months. Treasury yields jumped (5yr T’s…
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Deposit Funding Compass Week of February 7, 2024

Bonds prices fell this morning before a record $42 billion sale of 10-year Treasuries, with investors also awaiting a handful of Federal Reserve speakers for clues on the interest-rate path. US policymakers have left interest rates unchanged since July and have signaled the central bank’s next move is likely a cut. Several officials, including Chair…
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CU Funding Compass Week of February 7, 2024

Bonds prices fell this morning before a record $42 billion sale of 10-year Treasuries, with investors also awaiting a handful of Federal Reserve speakers for clues on the interest-rate path. US policymakers have left interest rates unchanged since July and have signaled the central bank’s next move is likely a cut. Several officials, including Chair…
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Deposit Funding Compass Week of February 1, 2024

In a press conference Wednesday following the Fed’s announcement that they will leave rates unchanged chairman Powell signaled that by the time the Fed meets again in March he expects a rate cut to be on the table. The Fed’s policy statement released earlier Wednesday included several tweaks that suggested the central bank was taking…
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Deposit Funding Compass Week of January 24, 2024

Federal Reserve Bank of San Francisco President Mary Daly said it’s “premature” to think interest-rate cuts are around the corner, noting she needs to see more evidence that inflation is on a consistent trajectory back to 2% before easing policy.  The FOMC is anticipated to leave its benchmark interest rate unchanged for a fourth straight meeting on Jan.…
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