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Desk Trends

Solutions and opportunities from FHLBank's Money Desk

Demand for Longer-term Funding Rises as Members Seek to Manage Interest-rate Risk

by Rob Merenick, Business Development Manager, Money Desk

Beginning in 2008 and continuing through the third quarter 2009, FHLBank members were primarily interested in advance products with terms less than one year. In addition, many of our members have had sufficient short-term deposits on hand, adding to their concentration in short-term liabilities.

Over the last few months, however, FHLBank’s Money Desk has seen increased member interest in longer-term advance funding – both in total volume and total transactions. The two-year and three-year fixed-rate advances seem to be the terms and product of choice for members looking to lock in longer-term funding.

The recent increase in demand for longer-term funding may be signaling a change of viewpoint with regard to the future direction of interest rates. As I mentioned in last month’s article, the Federal Reserve released an advisory on interest-rate management in January, advising banks to consider the implications higher interest rates might have on institutions’ balance sheets.

Whether match funding a customer loan, reducing reliance on short-term liabilities, or just having a view of the future direction of rates, your institution might consider longer-term advances for interest-rate management.

If you are considering longer-term advances while rates are relatively low, you may want to take advantage of the next fixed-rate, mid-term advance special FHLBank Pittsburgh will offer on February 22, 2010. Watch your in-box for details.

As always, feel free to contact the Money Desk at 1-800-288-3400, option 2, to review all of your advance options.

DISCLAIMER:

This article has been prepared solely for illustrative and informational purposes by FHLBank. It is not an offer to sell or a solicitation to buy any financial product nor is it a recommendation to participate in any particular financial strategy. The values presented in this document are indications only; the actual amounts may vary. FHLBank reserves the right to revise or change the data presented in this document at any time without a direct or inferred obligation to notify any person of such revisions or changes. The recipient of this article, by accepting delivery of it, agrees to the above disclaimer.