Carlos Blanco | April 18, 2026 | Board-Level Summary
| # | Bond | Face | MV | % Port |
|---|---|---|---|---|
| 1 | 4.625% 05/2044 | $12.0M | $11.8M | 20.8% |
| 2 | 4.25% 02/2054 | $8.7M | $7.8M | 13.8% |
| 3 | 4.25% 05/2035 | $7.2M | $7.0M | 12.7% |
| 4 | 3.625% 08/2027 | $4.9M | $4.9M | 8.6% |
| 5 | 3.625% 02/2044 | $4.1M | $3.5M | 6.2% |
| Bucket | MV | Avg Duration | Est. Gain | New MV |
|---|---|---|---|---|
| Near (2026-27) | $11.66M | 1.0 | +$0.12M | $11.78M |
| Medium (2030-35) | $12.70M | 7.2 | +$0.91M | $13.61M |
| HSBC | $11.78M | 5.0 | +$0.59M | $12.37M |
| Long 2044 | $17.22M | 14.7 | +$2.53M | $19.75M |
| Long 2054 | $14.02M | 19.5 | +$2.73M | $16.75M |
| TOTAL | $68.4M | ~11.5 | +$7.52M | $75.9M |
| Scenario | Rate Ξ | Gain/Loss | New MV | Unrealized |
|---|---|---|---|---|
| Aggressive easing | -200 bps | +$15.0M | $83.4M | +$13.9M |
| Strong easing | -150 bps | +$11.3M | $79.7M | +$10.2M |
| Base case | -100 bps | +$7.5M | $75.9M | +$6.4M |
| Moderate easing | -50 bps | +$3.8M | $72.2M | +$2.7M |
| Status quo | 0 bps | $0 | $68.4M | -$1.1M |
| Mild tightening | +50 bps | -$3.8M | $64.6M | -$4.9M |
| Tightening | +100 bps | -$7.5M | $60.9M | -$8.6M |
Q1 GDP tracking at just 1.3%. Consumer sentiment at lowest since 1952. Mauldin's "Muddle Through" thesis suggests slow-burn deceleration rather than crash β but any move below 0% GDP triggers panic Treasury buying.
Fed Funds at 4.50% β restrictive. Room for 3-4 cuts if inflation cools toward 2.5%. Each 25bp cut puts mechanical downward pressure on the entire yield curve. Market already pricing ~2 cuts by year-end.
Crude already fell $93 β $82 on de-escalation. Full Hormuz reopening could push oil to $65-70. Energy is ~7% of CPI β oil at $65 mechanically drops CPI by 0.3-0.5%. Cascading effects through shipping, manufacturing, food costs.
Mauldin's "Great Reset" warning. Commercial RE stress with record office vacancies. Regional bank exposure. Any credit event β flight to safety β yields crash. 2008 precedent: 10Y went from 4.0% to 2.0% in months.
Geopolitical escalation (Taiwan, Middle East, Europe). Foreign central bank reserve accumulation. Any equity correction of -10%+ drives massive flows into Treasuries.
AI productivity gains reducing labor costs. Goods deflation visible in used cars, electronics. If services inflation breaks β narrative flips from "sticky inflation" to "deflation risk."
| Factor | Detail | Impact |
|---|---|---|
| Consumer sentiment | Lowest since 1952 | Spending pullback β growth slows β rates fall |
| Oil crashing | $93β$82, could go $65-70 | CPI drops mechanically |
| GDP slowing | 1.3% Q1 tracking | Near-stall speed β Fed acts |
| Fed has room | 4.50% β 3.50% = 4 cuts | Each cut helps portfolio |
| PPI cooling | +0.5% vs +1.1% expected | Pipeline inflation fading |
| S&P earnings | 13.2% growth, 6th double-digit Q | Economy OK but inflation cooling |
| Muddle Through | Mauldin's gradual normalization | Rates drift lower 12-18 months |
| Factor | Detail | Impact |
|---|---|---|
| CPI at 3.3% | 61 months above 2% (Bilello) | Fed can't cut aggressively |
| Earnings booming | 13.2% growth β economy strong | No urgency for cuts |
| S&P at ATH | All-time highs β no panic | No flight to safety |
| Fiscal deficits | $2T+ annual deficit | Supply pressure keeps yields high |
| Sticky inflation | Services, shelter, insurance | Fed higher for longer |
| Duration risk | 49% in 2044-2054 bonds | +100bps = -$5.3M on long bonds |
Expected value (probability-weighted): ~+$4.5M
The floor outcome. Regardless of rate moves, collect $2.6M annually. Unrealized loss of -1.6% is noise on a portfolio this size. At maturity, full face value is recovered.
49% in 2044-2054 isn't just a rate bet β it's crisis insurance. In 2008, 30Y Treasuries returned +25% while equities fell -38%. If a financial crisis hits, these bonds could appreciate 20-30%.
If base case plays out (10Y β 3.3%), the ~$14M in 2054 bonds could be worth $17-18M. Consider selling 30-50% to lock in gains, then reinvest in 5-10Y paper to reduce duration risk.
$5.4M matures in 2026, $6.3M in 2027. If rates have dropped: extend duration with 10-20Y paper. If flat/higher: stay short (2-5Y). Consider a barbell: 50% in 2Y, 50% in 20Y.