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.
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.
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.
By Matthew Maggi
The battle between the individual and greater society has intrigued me since my youth. Books like Fahrenheit 451 and Brave New World captivated me and made me question my role as a human being. Attempting to balance the needs and importance of the one versus the greater good seemingly proves futile, yet, the importance of the individual remains a prominent aspect of our culture. We celebrate the achievements of individuals in sports, business, politics, even our families, but we hope that individual contribution benefits others. This challenge also manifests itself when managing our fixed-income portfolios.
As rates move higher …?
By Josh Kiefer
As the general consensus continues to suggest higher Treasury rates ahead, portfolio managers should remember the importance of cash flow and price stability. Predictably, unrealized losses expand as interest rates increase. Additionally, cash flow from securities with optionality tend to slow considerably, delaying the re-pricing of principal and aggravating losses.