Interest Rate Chonicles

Treasury yields fell slightly on Tuesday -- a welcome sign for mortgage loan officers who are trying to get their loans closed. Yields on long-term Treasuries had been climbing as demand for bonds weakens due to the surplus of government debt. Treasury yields are linked to mortgages and other consumer loans. Many are concerned that higher borrowing costs could slow a recovery in the housing market.

But (and it's a large but) Housing Starts were much higher than anticipated in May; increased confidence in the economy will encourage investors to take more risk and move out of safe but low-yield treasuries. And, according to an article in Bloomberg, "Russia, India, and China are buying each other's bonds to lessen dependence on the U.S. dollar". These are but two examples of forces that can contribute to the weakening demand for U.S. Treasuries, driving rates upward.
If the expected recovery stalls, rates may hold steady. But there are many indications that rates will continue to rise.

You will read this again and again on this blog. . . pay close attention to your ALM position and be PROACTIVE. Make any necessary adjustments to position your credit union for profitability in a changing rate environment - even if it hurts a little in the short-term.