SOURCE: Kamakura Corporation

Kamakura Corporation

June 21, 2010 10:00 ET

Kamakura Releases 10 Year Monthly Forecast of U.S. Treasury Yields and Swap Spreads for June 2010

Kamakura Forecasts Sharply Lower U.S. Treasury Yields

NEW YORK, NY--(Marketwire - June 21, 2010) -  Kamakura Corporation on Monday announced its forecast for U.S. Treasury yields and interest rate swap spreads monthly for the next 10 years. Today's forecast shows 1 month Treasury bill rates peaking at 4.67% in the fourth quarter of 2017, down 52 basis points from the April 2017 peak of 5.194% predicted in May. The 10 year U.S. Treasury yield is projected to rise steadily to 5.115% on May 31, 2020, 37 basis points lower than forecasted last month. The negative 20 basis point spread between 30 year U.S. dollar interest rate swaps and U.S. Treasury yields reflects the blurring of credit quality between these two yield curves. The U.S. government is no longer seen as risk free, and 4 of the 16 panel banks that determine U.S. dollar LIBOR are receiving significant government assistance and are, in effect, sovereign credits. For more on the panel members, see www.bbalibor.com. The negative 30 year spread results in an implied negative spread between 1 month LIBOR and 1 month U.S. Treasury yields (investment basis) beginning in April 2015 and persisting through October 2019. 

Kamakura founder Dr. Donald R. van Deventer reacted to the forecast by saying, "We regard the implied negative spreads between the LIBOR-swap curve and U.S. Treasuries as the Disneyland of fixed income arbitrage. Kamakura believes that the market participants with the best understanding of the nature and causes of these anomalies will reap significant rewards."

The projected flattening in the U.S. Treasury yield curve is shown above and to the right.

The full text of the Kamakura forecast for U.S. Treasury yields and interest rate swap spreads is available each Friday afternoon on the Kamakura blog at this link:

http://www.kamakuraco.com/Company/ExecutiveProfiles/DonaldRvanDeventerPhD/KamakuraBlog/tabid/231/Default.aspx

The Kamakura interest rate forecasts are based on the forward interest rates embedded in the current U.S. Treasury yield curve and interest rate swap curve. These forward rates are extracted using the maximum smoothness forward rate approach first published by Kamakura's Donald R. van Deventer and Kenneth Adams in 1994 and modified in Financial Risk Analytics (1996) by Kamakura's Imai and van Deventer. The maximum smoothness approach is applied directly to forward rates in the case of U.S. Treasury yields and it is applied to forward credit spreads, relative to the U.S. Treasury curve, in the case of the swap curve.

Kamakura's rate forecast is available in electronic form, both in Kamakura Risk Manager table format and other forms, by subscription. For more information contact Kamakura at info@kamakuraco.com.

About Kamakura Corporation

Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing and software. Kamakura, along with its distributor Fiserv, was ranked number one in asset and liability management analysis and liquidity risk analysis in the RISK Technology Rankings in 2009. Kamakura Risk Manager, first sold commercially in 1993 and now in version 7.1, was also named in the top five for market risk assessment, Basel II capital calculations, and for "risk dashboard." Kamakura was also ranked in the RISK Technology Rankings 2008 as one of the world's top 3 risk information providers for its KRIS default probability service. The KRIS public firm default service was launched in 2002, and the KRIS sovereign default service, the world's first, was launched in 2008. Kamakura has served more than 200 clients ranging in size from $3 billion in assets to $1.6 trillion in assets. Kamakura's risk management products are currently used in 32 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, the Ukraine, Eastern Europe, the Middle East, Africa, Australia, Japan, China, Korea and many other countries in Asia.

Kamakura has world-wide distribution alliances with Fiserv (www.fiserv.com), Unisys (www.unisys.com), and Zylog Systems (www.zsl.com) making Kamakura products available in almost every major city around the globe.

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