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Hybarger & Associates

Serving Small to Mid-Size Community Banks for over Thirty Years

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    Banking Insights

    The Liquidity Trap

    11/16/2020

     
    Picture
    Two things are common among virtually all of our clients in the current economic environment. One, is that there is an uncomfortable level of Earnings pressure. The other is that banks currently have more liquidity than they have had in decades. The first condition is obviously bad. The second is more ambiguous.


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    What in the World is Going on in the Securities Markets?

    3/12/2020

     
    Something has gone haywire in the Government Securities Markets. This is apparent to everyone, but especially to those who follow the Markets closely.

    Most of the media attention is focused upon the Stock Market, which has been cascading lower at a significant pace.

    Dow Jones Industrial Average
    Picture
    Picture
    For those watching the Market closely, they are aware that the Government Securities Market took an extremely peculiar turn on Monday and Tuesday of this week.

    After reaching an all-time low yield of 0.38% on Monday afternoon, the Market began to increase and has remained relatively stable at around the 0.75% - 0.80% level.

    This made absolutely no sense, given the rapidly escalating concerns about the coronavirus and the increasing probability of additional Fed action at their March 18th meeting. So there must be some other force or dynamic at play which is not necessarily obvious. After some detective work, I think that I may have discovered two, actually.

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    Recession Indicator ~ The Inverted Yield Curve

    8/27/2019

     
    Picture
    Today we reached a definitive milestone, as it relates to the 10yr / 2 Yr Inverted Yield Curve.

    ​Although it has inverted several times during the past week, the inversion has been for only a short period of time.


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    The Potential Impact of a Negative Interest Rate Policy

    8/23/2019

     
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    This is not something that we are projecting, and it is certainly not something that we are advocating, but there is increasing talk among US official about the possibility of a Negative Interest Rate Policy in the United States, most recently by the President of the New York Fed.
     
    With the outlook for the US Economy at least having strong headwinds in the future, it is wise to realize that the Fed just does not have enough “firepower” (just 200 more basis points, compared to a traditional 400 bp’s plus) to get a recessionary economy turned around with traditional Monetary Policy tools.


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    Strategic Shift

    8/19/2019

     
    Sea change
    We have clearly experienced a “sea change” as it relates to Rates during the past few months. This is evidenced by the fact that virtually all sectors of the US Treasury Yield Curve, beyond one year, are down by 125 – 150bps.

    The Fed’s recent decision to lower the Fed Funds Rate by 25bps is just the latest episode in the drama that has been playing out, especially over the past few months.


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    Portfolio ~ Yields vs Valuations

    8/12/2019

     
    Which is most important?
    Picture
    For those who are not directly involved in managing a portfolio of bonds, there are many perplexing issues related to understanding the dynamics of a Fixed Income Portfolio compared to other investment vehicles. Perhaps the most vexing are the issues related to Valuation. With other types of investments, Valuation is the key to performance. However, this is not true in terms of the performance of a Fixed Income Portfolio. Yield is the key performance measure of a Bond Portfolio, with Valuation taking a very secondary position, which really represents a measure of opportunity cost. 


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    General Economic Outlook for 2019 & 2020

    1/11/2019

     
    Picture
    Something happened at the end of 2018...We finally entered the era of the dreaded "Negative Yield Curve." For some this is only a mild curiosity, but for those who manage money, this has potentially profound implications.

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    Yield Curve Dynamics - Principles and Implications

    11/28/2017

     
    Picture
    For centuries people were baffled by the strange markings on Egyptian tombs and temples. It was known that these markings were important to the understanding of this remarkable ancient culture. However, the key to this understanding was unavailable.


    Read More
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    • Who We Are
      • Firm's Founder and History
      • Officers
    • Who We Serve
      • Who Are Our Clients
    • What We Do
      • Asset / Liability Management >
        • Budgeting
        • Performance Analysis
        • Forecasting
        • Quality Control
        • ALM Board Reporting >
          • The Directors' Financial Digest
          • The Executive Management Series
          • The Account Level Forecasting Series
        • Alternative Planning Scenarios
      • Interest Rate Risk >
        • Reporting for Interest Rate Risk
        • Assumptions & Back-Testing
      • Portfolio Management & Accounting >
        • The InvestWise Reporting Series >
          • Portfolio Management Series
          • Financial Management Series
          • Econometric Series
        • "Total Return" Investment Strategy
      • Liquidity Risk Management
      • Capital Adequacy & Analysis
      • Dynamic Strategic Planning
      • Comprehensive Funds Management Policy
      • CECL Overview >
        • Historical Analysis
        • "Currently" Identifiable Risks
        • "Specific" Potential Risks
        • Potential "Future" Risks
        • Traditional Reserves vs CECL
      • General Consultation >
        • Holding Company Systems
        • Balance Sheet Pricing Strategies
        • Regulatory Reporting
    • What Our Clients Say
    • How We Interface
      • What happens when we become a Client?
      • How are Fees Determined?