At 6/30?11 bbt had $22.5 billion invested in gov't securities yielding 1.69%. Per the wsj bond data, a 5 year treasury note approximated a yield of about 1.69% during the second qtr of 2011. A 5 year treasury note has a duration of 4.25 years which means for every 100 bsp change in interest rate the price of the bond changes by about 4.25%
Today's wsj shows that the 5 year treasury note at 8/30/11 is yielding 95 bsp meaning that the bond price has significantly appreciated in price - .74 of 4.25% or in round numbers 3%. 3% of $22.5 billion of bonds at 6/30/11 equates to roughly $670 million in bond appreciation.
If I were Kelly King I would be dumping the $22.5 billion, take my gain of $670 million and buy back as much high cost debt as possible and reinvest it in higher yield mtg backed securities or AAA rated munis.
The Fed shows that unrealized gains on investment securities at 8/17/11 for the entire US banking sector is $29 billion. Big #. Equates to 2% of total bank equity.
Will be interesting to see how this play outs.
Of course, none of this gets any press on CNBC, the bear channel.
I am of the opinion the small investor has no place in the market today! The large investors move their money around and cause these market swings. Since they control the market swing they also know when to buy and sell. Would be interesting to know who has made it BIG over the past six weeks!! Just my thoughts!!!!
norm it seems the investment to make after paying down the high cost of debt, would be to buy back the stock at 2.9 percent and let the bank pay itself. Of course the tax structure could be a determining factor.
"have no clue where you get bear channel"
Mark Haines used to challenge the opinions of many cnbc guests.
I see less of that with the current crew. Meredith Whitney got away with the statement that banks are zombies - they're not investible. Sean Egan got away with much of the PIIGS debts should be marked down 50 to 90% of par, thus making european banks insolvent. No one on cnbc points out that there is virtually no correlation between the empire state, philly fed and richmond fed surveys with gdp. When these surveys were rocking earlier this year, it suggested growth of 4% when in fact it came in around .5%. The list goes on.
And much of the ok news is not even mentioned. I can't think of one time that cnbc, for example, referenced the weekly Federal Reserve report for US Commercial banks. The data is not great but it hardly suggests that we're going into a recession. And this is a very key report because it shows weekly loan growth by category which is a very meaningful indicator of the health of the economy.
CNBC, the liberals that won't tell you about the anti-competition USA administration here to wreck your stock market, compliments of trying to save his own job, not to mention the only job he has ever held, your prez, obama, trying to save jobs of the public, failure, utter fail
quit banging your head against the wall there nobank, move out of this board, move on, come join the ultra intelligent board, the ones that know how to trade and make money, quit wasting your time!
we asked the same question to the charter owners, and we got the same stoopid answer, that is why they are in such trouble