Serving Small to Mid-Size Community Banks for over Thirty Years
We have clearly experienced a “sea change” as it relates to Rates during the past few months. This is evidenced by the fact that virtually all sectors of the US Treasury Yield Curve, beyond one year, are down by 125 – 150bps.
The Fed’s recent decision to lower the Fed Funds Rate by 25bps is just the latest episode in the drama that has been playing out, especially over the past few months.
Whether we are truly headed toward a recession or the zero bound for interest rates may remain debatable subjects, but what does not seem debatable is the fact that Rates, especially the short end of the Curve, will continue to fall in coming months.
Therefore, we recommend that you strongly consider a discernible shift in Deposit Pricing:
We would recommend that the most attractive Deposit Rates, on a relative basis, would be in the less than 1 Yr maturity range, whereas Longer-Term Rates, greater than one year, may still be higher but only slightly so, creating a clear bias toward shorter maturities.
Such a Pricing Strategy should pay enormous dividends over the next year or two, or until Rates once again display a bias towards increasing.