So, literally at the same time Chair Matz was spreading the frenzied gospel of "end-of-world" interest rate risk (IRR) to the good folks of North Dakota (see here), back at home her NCUSIF investment gnomes were at play in the bowels of Duke Street, Alexandria. 
And, what a robust time those little wizards were having - with your insurance fund!!
Here are the new investments in the first quarter of 2015 which Ms. Matz' capital markets robusterians made on behalf of your credit union and America's 100 million individual credit union members...
Date of purchase $Amt. Yld% Matures Est. Unrealized Loss**
3/31/2015 $ 50M 1.71% 1/31/22 ($767,000)
3/31/2015 $ 50M 1.59% 3/31/21 ($633,000)
3/02/2015 $ 100M 2.06% 2/15/25 ($1,618,000)
3/02/2015 $ 50M 1.95% 2/15/23 ($384,000)
3/02/2015 $ 50M 1.86% 10/31/21 ($182,000)
2/17/2015 $ 100M 2.08% 2/15/25 ($1,437,000)
2/02/2015 $ 100M 1.69% 11/15/24 ($4,909,000)
1/05/2015 $ 50M 2.04% 11/15/24 ($873,000)
( - $10 million+)
** Valued at market 5/12/2015.
Despite Chair Matz' admonitions to the credit union "hoi polloi" in North Dakota and around the Country to "stay short" due to IRR, her staff seems not to have gotten the message.
If rates are set to "inevitably rise by over 2.00% by 2016", then certainly you wouldn't invest $450 million to mature in 8 years on average, incurring a market value loss of over $10 million in less than 90 days... with much greater losses to come - unless, of course, the agency staff does not believe what Ms. Matz says.
NCUSIF: IT HAS BECOME A QUESTION OF CONFIDENCE
- AND COMPETENCE.
6 comments:
Are you sure of the purchase dates? March 21 is a Saturday
Are these all US Treasury bullet maturity bonds?
Sorry, stand corrected; the date of purchase should read 3/31/15 rather than 3/21/15.... yield, etc are correct so it does not affect gain/loss estimate.
Would ask you to define "bullet maturity" in terms of a T-bill... not sure I understand the distinction? Are you suggesting w/o the coupon?
Thanks for catching the error... I'll adjust it!
(So, late reader!!!, if you're arriving late to the party, you won't have any idea what this is about!!!)
Can I download the coupon?
If bonds purchased are all UST debt, then the bonds are bullets and my question redundant.
If GSE debt, could be callable. Sorry for the confusion.
Maybe someone can teach dollar cost averaging to NCUA's investment folks because they are hit and miss on timing high points of the market.
Jim,
If your bringing attention to NCUA extending the NCUSIF portfolio does anything to cause NCUA to reverse the trend, the CU industry owes you big time.
While NCUA can correctly claim it does not hold short-term liabilities, that has been the case since 1985. The NCUSIF portfolio WAM should have minimal variance over all interest rate cycles.
NCUA changing its time horizon and reaching for yield when near historical low interest rates is inexcusable. When credit unions do the same, NCUA issues a cease & desist, forces the CU to liquidate bonds, or replaces management.
Howard Beale
We'll talk in future, after NCUA repeats the senseless claims that....
1) as an "insurance company we're different"...(as if insurance companies don't manage investment portfolios with great precision! THAT'S WHAT THEY DO FOR A LIVING!!!!!) and,
2) "By laddering" we reduce risk...blah, blah, blah (if that even began to make sense you should ladder on a shorter cycle as close as possible to your maximum permissible maturity - apparently 10 yrs. For ex. use a 10/9/8 cycle with $4 billion at 8,yrs, 9 yrs, 10 yrs. WAM of 9 yrs.....)
AFTER ALL YOU HAVE PERFECT LIQUIDITY WITH UST's!!!
Whaddaya think fellow robusterians?
Post a Comment