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BB&T Corporation Message Board

  • normlasky normlasky Aug 30, 2011 8:43 PM Flag

    Investment Securities

    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.

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