BANK TREASURERS AT 20
This month is the 20th-anniversary issue of the newsletter. In this edition, we look back at some of the major stories we have covered in the world of bank treasury. From rate cycles to accounting issues, Basel capital, AOCI, mark-to-market, and hedging, we delved into bank treasury investment strategies, trends in deposit balances and betas, and cost of funding. We covered the transition from LIBOR to SOFR and from incurred loss to CECL accounting. Over 20 years, bank treasurers have seen it all, from the GFC to the regional bank crisis last year, from the repo panic in September 2019 to the mini panic over the recent month-end. We have been there when the yield curve was positively sloped and inverted. This is where bank treasurers go to read all about it.
BANK TREASURERS REPLACE THEIR OUTDOOR GRILL
The forwards might already have priced in the 50-basis point cut this month, but for many bank treasurers, the move by the FOMC this month was a surprise and a bit unsettling, worried that the voting members might see something terrible on the horizon that they do not see.
BANK TREASURERS DON’T CARRY CASH
A worse-than-expected nonfarm payrolls (NFP) print at the beginning of this month set off a short-lived market panic in the equity and bond markets that continued into the following week.
BANK TREASURERS DON’T PANIC
The banking industry reported another solid quarter of earnings, which met and, in some respects, exceeded analyst estimates. Storm clouds on the horizon remain muted.
BANK TREASURERS GO POND FISHING
This month’s newsletter covers speculation on the timing of the first rate cut, the positives and negatives of an inverted yield curve and higher for longer, the effect of QT on reserves and bank deposits now that the balance of the RRP appears to have hit a floor, and why rate cuts will not necessarily lead to lower deposit rates.
BANK TREASURERS REMEMBER GERRY CORRIGAN
This month's newsletter is dedicated to the memory of Gerry Corrigan, the sixth president of the New York Fed from 1985 to 1993, known as the Fed's plumber, the go-to guy Paul Volcker and Alan Greenspan turned to in a financial crisis. He would have made a great bank treasurer, not only because of his training as an economist but because he understood the mechanics of an economic system and how to fix problems when they arose, a valued skillset for bank treasurers.
BANK TREASURERS IN NEUTRAL
Wonders never cease in the bank treasury world, what with earthquakes in the metro NYC area to eclipses of the sun, but surely the sudden flattening of the yield curve this month, which is now half as inverted as it was last month, must stir the imagination of even the most experienced bank treasurer. This month’s newsletter pulls back the curtain on why a neutral balance sheet is not risk-free…
BANK TREASURERS BEWARE THE IDES OF MARCH
On the first anniversary of the crisis last March, this month’s newsletter looks at lessons learned. One of those lessons is to beware of lessons learned, especially when they are based on “flawed, post-mortem reviews.”
BANK TREASURERS SEE THROUGH THE ACCOUNTING
This month’s newsletter discusses how bank treasurers restructured their underwater bond portfolios last quarter when the 10-year rallied in November and December. It also explains why bank treasurers, most of whom believe they have more to fear from the Fed cutting rates by 300 basis points than raising them, are more hedged for higher rates going into 2024 than they were going into 2023.
BANK TREASURERS SEE UFOS
There are a lot of strange things going on in the bank treasury world, and as always, bank treasurers know to prepare for anything. You have a yield curve that is inverted for the longest time in decades, and where the marginal cost to fund a loan makes it difficult to lend profitably.
BANK TREASURERS AT YEAR-END
This month’s newsletter discusses the Fed’s rate pause, why the expected cuts may disappoint, and how bank treasurers are planning around the potential for cuts in 2024 if they do happen. While the FDIC board struggles with some of its own internal management issues, its proposed rule to make board directors equally responsible for the management of the bank has got everyone worried…
BANK TREASURERS WERE NOT ON THE MAYFLOWER
The FHLB100 report is finally out and, as the newsletter reported in last month’s edition, the FHFA put pressure on the FHLBs to withhold new advances to a failing member and instead, to redirect the call to the Fed’s discount window.
BANK TREASURERS ARE WONKS
This month’s newsletter discusses the FHLB100, a big deal that has not gotten a lot of press but should considering how important the FHLB system has proven itself to be in the last year and a half since the banking industry’s deposits peaked in Q! In 2023, the Fed started raising rates and shrinking SOMA. The FHFA is supposed to release its report before the end of the year and the latest scuttlebutt is that it may come out next month. Of course, if the government shuts down again, then all bets are off.
BANK TREASURERS HAVE LONG MEMORIES
An underwater bond portfolio must be one of a bank treasurer’s greatest headaches these days, and the Fed’s signal last week that rates may remain elevated for some time does not ease any of that pain. The choice remains the same: rip off the band-aid, sell the bonds, and, taking advantage of the inverted yield curve, earn back the loss on the bonds over a few years. Or grin and bear it, letting the portfolio continue to be a wet blanket on NIMs until they run off.
BANK TREASURERS REMEMBER MARCIA STIGUM
This month’s newsletter recalls Marcia Stigum’s 1983 textbook, “The Money Markets,” which was “the” book to own on one’s bookshelf if one were working in a bank treasury office in the 1980s. In any case, she was very famous back then but today, her book is outdated and almost no one in the bank treasury world or greater financial markets ever heard of her. She wrote the book when the money market world was ruled by the Eurodollar market…
BANK TREASURERS AND THE KOBAYASHI MARU
The big news this afternoon is the Fed’s well-telegraphed rate hike, its 11th straight hike since it began raising the target Fed Funds rate in March 2022. But if bank treasurers were hoping for some sign from the Fed that there is a light at the end of the tunnel with these hikes, they are likely disappointed. The problem is that no one really knows where the Fed is headed, probably not even the Fed.
BANK TREASURERS STAY INDOORS
Well, the Fed finally paused, which judging by investor polls seemed to have been well-communicated. Bank treasurers informally polled by this newsletter could not have been surprised by the Fed’s statement that it was still weighing how much more to tighten rates in its fight against inflation, and not surprised by its “hawkish” pause.
BANK TREASURERS UNCHAINED
This month’s newsletter discusses key takeaways and implications from post-mortems by the Fed and the FDIC on the failure of Silicon Valley Bank and Signature Bank that they released at the end of last month. The bank regulators cast as much blame on their own institutional failures as they assigned to bank management.