November 20, 2009
KANSAS CITY (800) 548-2663 ST. LOUIS (800) 392-2252 WICHITA (800) 365-0349
T YIELD CURVE
Market Comment
Key economic releases continue to reflect some modest improvements in the economy, however; a report released this week from the Mortgage Bankers Association (MBA) continues to underscore weakness in the housing market and overall poor financial health of many Americans. According to the MBA, 14% of homeowners with a mortgage are either past due on payments or in foreclosure. Hardest hit states continue to be Florida, Nevada, California, and Arizona. Approximately 25% of mortgages in Florida are either past due or in foreclosure. The Federal Housing Administration (FHA) may be the next recipient of a tax payer funded bailout as 18% of FHA borrowers are at least one-month behind on payments or in foreclosure. Given the amount of problem residential mortgage loans and continuing rising unemployment it is likely that housing prices will continue to decline in 2010. The Treasury market has caught a bid over the last couple of weeks driving short yields to their lowest levels this year. Three-month treasury bills turned negative on Thursday as increasing concerns over equity valuations and a growing belief the Federal Reserve is on the sidelines until at least 2011-12 has fueled a bull steepening rally. Agency and mortgage spreads have continued to tighten to Treasury yields providing for the lowest re-investment rates this year. However, municipal spreads have widened some, but portfolio managers may be prudent to stay in higher quality, unlimited tax general obligation issues as state and local municipality budgets will remain tight in 2010.
Mike Dixson, VP - Interest Rate Risk Management Service
Calendar
| Monday | Tuesday | Wednesday | Thursday | Friday |
|---|---|---|---|---|
| 23-Nov | 24-Nov | 25-Nov | 26-Nov | 27-Nov |
| MBA Mortgage Applications | ||||
| 3 & 6 Mth Auc Settle 11/27 | Consumer Confidence | Initial Jobless Claims | ||
| Existing Home Sales | ABC Consumer Confidence | U. of Michigan Confidence | Thanksgiving Day |
Market Information
Key Indices |
|||
| Current | Last Month | 1 Yr Ago | |
| Prime Rate | 3.25 |
3.25 |
4.00 |
| Discount Rate | 0.50 |
0.50 |
1.25 |
| Fed Funds | 0.12 |
0.12 |
0.49 |
| 1-Mth Libor | 0.24 |
0.25 |
1.41 |
| 11th Dist Cofi | 1.27 |
1.41 |
2.77 |
| 1-Yr Cmt | 0.27 |
0.39 |
0.87 |
| Dow | 10,322.20 |
10,041.50 |
7,552.29 |
| Nasdaq | 2,146.85 |
2,163.47 |
1,316.12 |
| S&P 500 | 1,091.73 |
1,091.06 |
752.44 |
| Bond Buyer | 4.35 |
4.31 |
5.13 |
| Municipal New Issue Calendar | |||
| Date | Amount | Description | Maturity |
| 12/1/09/09 | $1,400,000 | Webster Groves MO COP BQ | 2011-2015 |
| 12/3/09 | $5,000,000 | Lee's Summit MO | 2010-2011 |
Comparative Spreads
| New Issue Agencies | Muni | |||||
Treasuries |
Bullets |
NC 6 Mon |
NC 1 Yr |
NC 2 Yr |
AA - BQ |
|
| 3 Mon Bill | 0.00 |
0.60
|
||||
| 6 Mon Bill | 0.12 |
0.70 |
||||
| 1-Yr Treas | 0.24 |
0.80 |
||||
| 2-Yr Note | 0.69 |
12 |
23 |
22 |
0.95 |
|
| 3-Yr Note | 1.20 |
24 |
45 |
41 |
29 |
1.25 |
| 5-Yr Note | 2.14 |
43 |
65 |
62 |
46 |
2.10 |
| 7-Yr Note | 2.86 |
34 |
66 |
61 |
44 |
2.80 |
| 10 Yr Bond | 3.34 |
61 |
80 |
75 |
59 |
3.40 |
| 30 Yr Bond | 4.29 |
4.50 |
||||
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