Search: "yield curve"

Long-Term CDs – Questionable Cost of Funds Protection

The 10-year Treasury closed below 1.40% 3 days in July! The flattening of the yield curve has many folks worried about further pressure on net interest margins. Some, though, are hoping to extract a benefit by locking in long-term funding at historically low interest rates. As an Asset/Liability Management (A/LM) strategy, this approach employs the […]

Observations from ALM Model Validations: NEV – Loans Devalue in Rate Shocks – or Do They?

When considering valuation as a measure of interest rate risk, and value volatility as an indicator of changes in interest rate risk, many institutions perform net economic value (NEV) analysis. When working with credit unions, or performing model validations, a concern many have is ensuring the models have the “right” assumptions. What is the “right” […]

Observations From ALM Model Validations: High Starting NEV Ratios

When performing model validations, it is common to see a net economic value (NEV) ratio that is considerably higher than the credit union’s current net worth ratio. Understanding NEV and net worth are two completely different concepts; there are reasons why starting with a high NEV ratio in the base environment may not be reasonable. […]

Forward Curve Back Testing

Our last blog, NEV Does Not Equal NII, drew questions from some of our readers. Specifically, some questioned our comment about a forward curve’s inability to predict interest rates. This is fair, since some in the industry seem to treat it as a foregone conclusion that a forward curve will come true. We hear a […]

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