Independent Banker - February 2024 - 40

PORTFOLIO PORTFOLIO MANAGEMENT
The big chill
Might the bond market be range-bound in 2024?
By Jim Reber, ICBA Securities
" F
ebruary made me shiver... "
-Don McLean
You may recognize the above
phrase from the iconic 1970s hit song
" American Pie. " It seems the singer
was reminiscing about the 1959 plane
crash that claimed the lives of Buddy
Holly, Richie Valens, the Big Bopper
and the pilot, Roger Peterson. But
perhaps the thought can be adapted
to what may be in store for bond
investors in 2024.
If, in fact, the Fed's Federal Open
Market Committee (FOMC) has
reached a point where it has stopped
raising rates but has no immediate
plans to cut them, does that mean the
bond market will be frozen in place
this year?
There are many parallels to
where we are now and the last time
the FOMC took a break with Fed
funds above 5%. Though not all the
circumstances are the same, it may
be worthwhile to see how the period
from 2006 through 2008 played out.
The hope is that you may be able to
better prepare your community bank's
balance sheet for the next phase in the
interest rate cycle, whether it's a freeze
or a thaw.
Multiyear run
In June 2004, the Fed chairman was
Ben Bernanke. Under his direction,
the FOMC raised rates from 1% to
1.25%. For each of the following
16 meetings, another quarter point
(0.25%) bump was added to the
total. Finally, in August 2006, the
FOMC took a break, as the sum of
the tightenings (4.25%) began to
have the desired effect of cooling
off a hot economy, particularly
the housing market. Part of the
statement released after the meeting
mentioned that " economic growth
has moderated from its quite strong
pace earlier this year. "
40 // ICBA Independent Banker // February 2024
Photo by Mikelaptev/Adobe

Independent Banker - February 2024

Table of Contents for the Digital Edition of Independent Banker - February 2024

Contents
Independent Banker - February 2024 - Cover1
Independent Banker - February 2024 - Cover2
Independent Banker - February 2024 - Contents
Independent Banker - February 2024 - 2
Independent Banker - February 2024 - 3
Independent Banker - February 2024 - 4
Independent Banker - February 2024 - 5
Independent Banker - February 2024 - 6
Independent Banker - February 2024 - 7
Independent Banker - February 2024 - 8
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Independent Banker - February 2024 - 35
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