Americans paid more for housing and driving in December as inflation increased and the CPI registered 3.4%. On an annual basis, the so-called core measure increased 3.9%. Early reactions show the rates market interpreting this as a challenge the Federal Reserve will cut interest rates as imminently as previously thought. The odds for a cut at the Jan 31st meeting have dropped to 0% while futures still have a 50% probability for March.
Banks across the country are active in the brokered funding market to start 2024. This time last week the count on active new Issue CDs was around 100, this morning there are firmly over 300 open new issue CD offerings. Supply, coupled with a softer rates market, is ultimately going to manifest in marginally higher funding levels for the near term. While we feel issuers can still remain aggressive, buyers are indicating they’re going to be looking for a positive spread to US treasuries across most parts of the curve.
We have a variety of callable structures that are proving to be very beneficial to a bank’s liability portfolio in that longer term funding can be captured while not having to sacrifice the benefits of short term funding (retained call option). These structures can be customized in order to fit balance sheet needs. We are displaying just a few of today’s opportunities. Feel free to inquire with the desk if there are any desired final durations and lockout periods that you would like to see rate quotes on.