WASHINGTON – NCUA spokesman John McKechnie said the agency hopes the new Credit Union System Investment Program (CU SIP) will kill two birds with one stone: it will infuse liquidity into the corporate system using the Central Liquidity Facility, and offer a 25 basis points return to natural person credit unions along the way.

Here's how the cash flow works: natural person credit unions will apply for a CU SIP advance, which carries a one-year term maturing no later than Dec. 31, 2010, with a rate equal to the greater of the Primary Credit Rate at a Federal Reserve Bank discount window, and the rate on a comparable maturity Treasury security, plus 1/8^th percent.

Credit unions are then required to invest the funds in CU SIP notes, which will be issued by corporates and will carry an NCUSIF-backed guarantee. Notes will have maximum one-year terms and the return will equal the advance rate plus 0.25%.