Pub. 1 2021 Issue 1

February 2021 | 23 The prepayment protection they afford is especially attractive in yield environments like we have at the present. rate, the harder it is for a homeowner to eco- nomically benefit from refinancing. There is a high correlation between note rate and prepayment speeds. Similarly, the more a borrower owes on his or her dwelling, the more likely the math works in favor of a refinancing. What isn’t quite as universally known is that certain states (e.g., New York and Florida) have punitive taxes and fees that make the pros- pects of cutting the debt service costs much more difficult. As an investor, you can ask for “prepayment friction” pools containing some type of specific collateral that can significantly reduce prepayment risk. Answer: This is by far the most popular month for municipal bond maturities and calls. Question: What is January? Given that we’re embarking on a new calendar year, and, generally speaking, community banks have more cash and liquidity than they prefer, it’s worthwhile to mention in the near term there will be a lot of money being turned over in muni land. It’s possible that the “January effect” could play out in all its glory this year. That is the outcome of a lot of money chasing a limited supply of bonds. Many municipal borrowers, and this certainly includes BQ issuers, don’t tap the mar- ket until later in the year. So, it’s entirely plausible that the combination of the wave of redemptions coupled with scant early-year supply will put a serious lid on yields. Many community banks forward purchase in January and February once they identify which bonds in their portfo- lio will be maturing or will be called away. Answer: This financial services sector punched above its weight in extending credit to small businesses at the height of the COVID-19 pandemic. Question: What are community banks? ■ Jim Reber (jreber@icbasecurities.com ) is president and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks. Call me at 402.301.3707 Based in Omaha, Neb., covering Nebraska, Kansas and Missouri Mike P te Together, let ’s make it happen. Member FDIC 24870 We do not reparticipate any loans. Leverage our large lending capacity, up to $20 million on correspondent loans. Our lending limits are high enough to accommodate what you need, when you need it. Why choose Bell as your bank’s lending partner? Commercial & ag participation loans Bank stock & ownership loans Bank building financing Business & personal loans for bankers