Articles & Insights

Stay informed and up to date on the latest financial topics. Read articles written by our financial strategies team.

Interest Rate Risk Doesn’t Do Quarantines

The world has changed. The nation’s economic lockdown has given previously confident consumers a new and cautious attitude of frugality. The propensity to borrow and spend has turned into an inclination to deleverage and save. Once prosperous businesses struggle to stay afloat as society and culture adjust to a new,

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Managing Credit Union Liquidity and Performance After COVID-19

2020 will certainly be remembered as the year Covid-19 changed the world as we know it. Likewise, the associated “Lockdown Recession” is already changing the way many credit union leaders manage their balance sheets. With loan demand dropping in most parts of the country and stimulus deposits adding to already

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Federal Reserve to Provide Lending Facility to Municipalities

The Federal Reserve just announced a new Municipal Lending Facility targeted to specific state and local governments. The facility will buy up to $500 billion of short-term notes directly from states and local governments. Only cities with a population of at least one million residents and counties with a population

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COVID-19 Municipal Market Impact

The municipal securities market is going through unprecedented volatility amidst the COVID-19 pandemic. The initial “flight-to-quality” into U.S. Treasuries in early March also included a rally in the municipal sector that drove yields down to all-time lows. The 10yr AAA MMD benchmark index reached just 78 basis points on March

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Municipal Credit Update: Managing Credit Risk amid the COVID-19 Pandemic

Concerns of an economic downturn escalate as the rapid spread of COVID-19 necessitates widespread event cancellations, business and school closures, and quarantines. These actions have undoubtedly caused economic activity to decline, and we’ve already seen some consequences as equity returns have plummeted. Meanwhile, plunging oil prices are leading to lower

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Don’t Hitch Your Strategy to a Rate Forecast

Fate Has Earned Its Reputation 2019 may best be remembered as the year when things that weren’t supposed to happen, happened anyway. The world’s major economies weren’t supposed to have spiraled downwards, but they did. Bond yields were not supposed to have fallen, but that’s what happens when growth decelerates.

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Regulatory Priorities in 2020

Another year in the books and another great year for the banking industry. Profits were strong, but there are always concerns on the horizon. Regulators who have been on the job for more than ten years haven’t forgotten the most recent financial crisis and the problems and bank failures that

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Market Conditions at the Turn of the Year

A Quick Recap and Key Points to Ponder Where We’ve Been: It’s fair to say that 2019 was quite a transition year for Fed policy, interest rates, and the bond market. The yield on the 10-year US Treasury Note, after reaching an eight-year high of 3.24% in November of 2018,

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Tools for Managing Liquidity Risk

Lessons Learned on Liquidity Risk The FDIC and other regulators continue to underscore the importance of sound liquidity risk management for financial institutions. The focus on liquidity has been building for some time as steady loan growth during the past several years has resulted in a decrease in short-term liquid

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Municipal Credit Update: Characteristics to Cautiously Consider

Municipal bonds remain a key sector for bank portfolio managers. It’s not uncommon for banks with assets under a billion dollars to dedicate thirty percent or more of their portfolio to municipals. Clearly, pre-and post-purchase credit analysis of municipal holdings continues to be critical. Although municipal bonds generally experience very

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A “Total Bank” Framework for Investment Management

The Bank as a System Forty years ago, Dr. James V. Baker wrote about systems theory development in his original work on asset/liability management. He illuminated the idea that a bank is a system of complex relationships that cannot be analyzed in complete isolation. The output of one decision serves

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Where Do Net Interest Margins Go from Here?

In June 2004, the Fed increased the federal funds rate by 25 basis points, the first of many rate increases to follow. Over the next two years, the Fed increased rates from 1.00% to 5.25%, a quick and aggressive tightening cycle when compared to today’s cycle that has seen nine

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Asset/Liability Management and Balance Sheet Dynamics

The Banking Environment It is not news that community banks have struggled with sluggish net interest margin for several years. We know that funding cost hit bottom some time ago, while yields on earning assets continued to whittle lower. Older loans and bonds paid off or matured and were replaced

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