The NCUA had alluded to this possibility during its Washington and San Diego town hall meetings. Many of the corporates have issued debt in the form of commercial paper. U.S. Central and WesCorp have also issued medium-term notes previously, according to the NCUA.
"We are studying the transaction to get a better sense of its ultimate impact on credit unions," CUNA Vice President of Communications Pat Keefe said.
The purpose of the medium-term note issuance is to secure another source of funding to ensure bonds can be held to recovery, the NCUA stated. It added that the offering will also enhance stability since much of the current corporate funding is short-term. NCUA said the issuance is a part of a normal process to maintain a balanced asset-liability mix.
The issuance was completed Oct. 14. It is a combination of a two-year floater ($500 million at three-month Libor + 0); two-year fixed ($1.5 billion at swaps + 0); and three-year fixed ($2 billion at swaps + 5). All have a trade date of Oct. 14 and a settlement date of Oct. 19. On Oct. 14, the two-year swap rate was around 1.27%. At the same time, natural person credit unions were earning 1.19% on two-year CDs at First Carolina Corporate and 1.15% at Mid Atlantic Corporate.
J.P. Morgan and Bank or America/Merrill Lynch served as lead underwriters for the issuance.