The bond price bubble will eventually pop as rates rise, creating potential for the next crisis: a one-two punch of deposit withdrawals and negative spreads as hundreds of credit unions fall short of the earnings needed to compete on deposit rates. The cost of funding will overwhelm asset yields and punish even the strongest balance sheets due to the interconnectedness of credit unions that leads to a phenomenon we call the growth tax.
Although we believe it is premature to say the U.S. has recovered from the credit bubble, important financial trends indicate that credit unions should start planning for the inevitable end of Federal Reserve rate accommodation now, while there is still time.
For perspective, take a look at the nearby table.
Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.
Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical CUTimes.com information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers, resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
- Exclusive discounts on ALM and CU Times events.
- Access to other award-winning ALM websites including Law.com and GlobeSt.com.
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
