Short-Term CDs, a Lullaby.

Remember the sweet little lullaby Rock-a-bye Baby? - It's very soothing, puts the baby to sleep, nice. That is until you consider some of the lyrics: "When the bough breaks, the cradle will fall. And down will come baby, cradle and all".

Market Rates Insight has released a new analysis which confirms what most of us already know. Members are eschewing long-term CDs for short term deposits. This has been the trend for at least the past year, and as a result, the typical credit union's cost of funds has dropped rather quickly and significantly. Since deposit interest rates are historically low and you still hold loans and investments booked during a period where rates were higher, your bottom line is looking better (aside from loan losses, a Brother's Grimm story). Heck, you can even run a loan special a very low rates, right? "Rock-a-bye baby. . ."

Flash forward. Rates begin to rise, and all that short-term money begins to reprice. Quickly. Within a year. You hear someone say, "hey, what's happend to the bottom line? It turned all red". That loan special you were so proud of? No one is claiming credit for that brain-child anymore; and "down will come baby, cradle and all. . ."

The good news? Rates probably won't move much within, say, the next year or so. But once they do, they can move quickly. Age-old advice that the wizened give - be forward looking and get your balance sheet in order, you might have a little time.