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Short-Term Ladders and LIBOR FRAPs Are Keys to Success for CUs Now

Today's investors are caught in a battle between rising inflation and a slowing economy, translating into a debate over whether interest rates will be moving lower or higher in the near future. The variables continue to change daily, but one factor has been constant: the rising price of oil. Oil...

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Today’s investors are caught in a battle between rising inflation and a slowing economy, translating into a debate over whether interest rates will be moving lower or higher in the near future. The variables continue to change daily, but one factor has been constant: the rising price of oil. Oil reached a record high price of $138 a barrel, which soon translated into a national average of $4 a gallon for gasoline. Will this price increase continue to create inflation problems or will it translate into a reduction in consumer spending altogether?

With so many powerful forces at work in the marketplace, credit unions are not really in a position to influence the resolution of big picture economic problems. Instead, portfolio managers are focused on the day-to-day concern of how to eke out the most income in this stagnant environment. Due to the build-up of excess liquidity over the spring, which has occurred in advance of seasonal loan demand, credit unions are trying to determine the best way to invest funds now, while preserving their opportunity to take advantage of higher rates expected later this year.

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