top of page
  • Writer's pictureDarnell Canada

Looking at the Cash/Investment Strategy Through a Rear View Window

Looking at the Cash Investment Strategy Through a Rear View Window

ALM Strategy | Interest Rates

In November, I wrote about widespread fears of rising market rates and the related risks and rewards of adding duration to the cash and investment portfolio.

Since that time, community banker sentiment has only grown more worrisome with the market outlook for aggressive FOMC rate hikes. Last fall, the outlook for tighter monetary policy priced the December 2022 contract with close to a 100% probability of the funds rate peaking at 1.50%. Now, only 6-months later, the current market outlook is pricing in a 90% probability of the funds rate exceeding 2.00%! During that time, the 2-year UST rate has increased 200bps while the 5-year and 10-year UST rates have risen 150bps and 90bps, respectively.