From the February 28, 2021 NCUSIF financial statement:
Investments
One T-note purchase for $600 million on February 15 with a fixed yield of .90% for seven years.
This investment extended the NCUSIF’s average weighted duration from 1,184 to 1,243 days, or 3.45 years.
Would your CFO make a fixed-rate seven-year investment at this phase of the economic cycle for your credit union? What would your examiner say?
Where are the NCUA Capital Market Specialists when you need them? Did the NCUA shock test this $600 million investment in a +/- 100, 200, 300 bps environment?
For credit unions this is a required a first step. When I was a CEO, examiners forced my peers to sell long term investments at a loss after NEV shock tests. Appears such assessments are not applicable to the NCUA. This is not a smart investment in this phase of the economic recovery cycle. Who made this decision at Duke Street.? What is their ALM experience? Why is there no public discussion of this at the April Board meeting? Where is NCUA getting their investment advice?
Would the persons responsible lock up their personal savings at a rate of .90% fixed for seven years? Commonsense says absolutely not. So why lock up credit union’s collective savings this way?
Investing in treasuries is not rocket science. When this $600 million dollar launch crashes in value in the near future, it is credit unions that will pay the cost. What is the end game? This $600M will have a huge decline in value as rates move up in the coming months or years.
The NCUSIF has a back up plan in the NCUA. When the NCUA needs to raise more revenue they play the A word…Assessments. This is why my credit union CEO peers and I read NCUA as Not Credit Union Accountable. Never Shocked. Just Disappointed.
Probably the same team of “NCUA” investment experts assigned to USCentral and Wescorp before the mortgage crisis and now promoted to senior positions and oversight of the whole $19 billion.