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Mortgage-Backed Securities and ‘True’ Yield

Do the Math.

By Jeff Goble

Many banks throughout the Midwest have been overweighting mortgage-backed agency securities issues for their portfolios during the period when the Federal Reserve has been conducting historic amounts of quantitative easing. These bonds have nearly replaced the traditional agency and Treasury holdings held in most bank bond portfolios since the Fed has been purposely driving up their prices in order to lower mortgage rates.

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Will the Fed Be Able to Stay the Course?

The one thing that almost everyone agreed on over the past two years is that after almost a decade, the Fed needed to gradually increase rates from the near zero rate level. Now that the Fed is completing its second year of increases and overnight rates have eclipsed 2 percent, there is an increased feeling of angst in the world of business.

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Managing Earnings: Keeping Score

By Dennis Zimmerman

A common goal for nearly all financial institutions is to increase earnings via an improved margin, but how do you know if the bank’s current asset/liability management strategies are aligned with its earnings expectations? Equally important, how do you know if/when adjustments are needed to current balance sheet strategies? Finding the right answer to these types of questions is key to ensuring that your institution hits its 2019 earnings forecast.

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Taxes, Tax-Exempt Bonds and Technical Factors

By Kevin Doyle 

The election of Donald Trump heightened expectations for tax reform in late 2016, causing tax-exempt municipal bonds to initially underperform taxable bonds. Logically, wouldn’t tax-free income become less valuable if the newly-elected president, with Republican control of Congress, could significantly reduce tax rates, as promised throughout the campaign? Looking back, we now know taxes were cut, but logic failed.

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Good News! The Federal Reserve is Expected to Hike Interest Rates Again

By Jon Meyers

September 28 — When the Federal Reserve announces a rate adjustment, multiple market sectors take notice — especially lenders and developers in commercial real estate. Since 2015, the Federal Reserve has raised interest rates nine times, the most recent in September. Slowly increasing from almost zero percent, one more rate increase is expected before the end of this year.

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