Thursday, December 15, 2016

The Land of OZ.... NCUSIF Unrealized Losses

What did 'ya need "to get the message",
 a registered letter!?!
While waiting around yesterday for the FED's "surprise"
announcement  (... a surprise only to the "hazards of Duke"!) of an interest rate change, noticed that the agenda [here's the link] for today's NCUA Board meeting is packed with "interesting stuff", like the Corporate Stabilization Fund and NGN Legacy Asset Disposition Strategy - may well be worth "streaming", starts at 10 a.m.! 

"Pay no attention to that ("robust")
man behind the curtain..."
Hopefully the Board, while they are at it, will ask the staff to discuss their NCUSIF "investment strategy" during the "open session".

We've been talking about 1) repositioning and shortening the NCUSIF portfolio in the face of an announced FED strategy of raising rates (perhaps with 3 more rate increases in 2017!), and in doing so, 2) "capturing" and booking the $247 million in "unrealized gains" reported by Mr. Rendell L. Jones, NCUSIF CFO, at October 31, 2016.  

As you will recall the unrealized gains were $457+ million in June, 2016, were $381+ million in September, 2016 and were $247+ million in October - "capturing" those gains before rates rose further was a great opportunity to avoid that $300 million ("3bps") assessment on credit unions next year!

Well, as part of the reporting for the meeting today, NCUA has published the November 30, 2016 NCUSIF financials and that $247 million unrealized gain has grown into a...

... reported unrealized loss for the NCUSIF portfolio as of November 30, 2016 of


A swing and a miss!

Oh, well...

* A $500 million swing in value in just 5 months!... and each additional 25 basis point increase by the FED next year will create a further -$143 million in unrealized losses.


Anonymous said...

Like I said, "about zero". Was off a little.
The US Treasury with a 5 year maturity finished down in price by about a half point yesterday.
So it's a larger "miss" this morning.
Prudent investment strategy could have paid fo the 23% exhorbitant lawyer fees.
Now we get assessed.
Good job for government work.

NCUA, systematically built to underperform.
No no no C...and it starts with no T for transparency.
And mcwatters isn't the answer apparently.
And credit union trades do not hold NCUA accountable so we pay them....why?

Waiting on congress.

Anonymous said...

For what it is worth, we received formal guidance to expect between 3-6 bps of assessment expense in 2017 and were told to put it in our budget.

Jim Blaine said...

On assessments, if the NCUA permits the current NCUSIF investment posture to continue, the NCUA budget is not cut substantially (which is impossible in the short run) and CUs continue to grow strongly, then CUs will be assessed in each of the next 3 years at a minimum

And, you can take that forecast to the bank!

Anonymous said...

Mr. Blaine you're going to see you're wrong about the NCUA Board today no cojones!