Credit union portfolio managers responded to these shifts in the curve by increasing their allocations to medium- and long-term investments. Securities maturing in five to 10 years reported the greatest increase, expanding 20.6% since December and 36.3% annually. This took the total funds invested in this segment to $119.3 billion. Consisting of 16.5% of the total investment composition, five- to 10-year terms are now neck-and-neck with three-to-five-year securities as the largest non-cash portion of industry portfolios. Cash remains the largest portion at $251.0 billion – comprising 34.8% of total investments – but its dominance is waning. Following record cash balance growth during the pandemic, cash funds decreased 2.6% from the previous quarter, and are down 14.4% compared to a year ago. Overall, credit unions have distanced themselves from low-yield investments, looking instead to invest more funds into mid- and long-term securities.

Industry Yield up Two Basis Points

The average yield on investments increased two basis points quarter-over-quarter, to 0.91%. This was the fourth straight increase on a quarterly basis. Year-over-year, investment yields are up eight basis points, gaining distance from the record low investment yield of 0.83%. Yields plummeted throughout 2020 and early 2021 as a credit union preference for liquid, low-interest cash combined with rate cuts by the Fed to drastically reduce overall portfolio returns. Looking ahead, the expectation is for average investment yields to continue their rebound as benchmark rates rise and cooperatives continue to favor long-term investment options.

Instant Insights /

Q1 Investment Trends: Patterns Flip in 2022

Related Stories

Recommended For You