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Friday, September 14, 2018 |
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MANAGING DIRECTOR: |
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US Treasury Market |
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| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 9/07/18 | 1.98 | 2.14 | 2.30 | 2.53 | 2.71 | 2.78 | 2.82 | 2.89 | 2.94 | 3.03 | 3.11 |
| 9/10/18 | 1.98 | 2.14 | 2.32 | 2.54 | 2.73 | 2.78 | 2.83 | 2.89 | 2.94 | 3.02 | 3.09 |
| 9/11/18 | 2.02 | 2.15 | 2.31 | 2.55 | 2.76 | 2.83 | 2.87 | 2.94 | 2.98 | 3.06 | 3.13 |
| 9/12/18 | 2.01 | 2.16 | 2.33 | 2.56 | 2.74 | 2.82 | 2.87 | 2.93 | 2.97 | 3.04 | 3.11 |
| 9/13/18 | 2.01 | 2.15 | 2.33 | 2.55 | 2.76 | 2.83 | 2.87 | 2.93 | 2.97 | 3.04 | 3.11 |
Source: U.S. Department of the Treasury, as of 09/13/2018
Marginal Cost of a Deposit Strategy
As you read in yesterday’s PMR, the Fed is set to raise the target rate another 25 basis points this month and then most likely another hike coming in December. The outlook for next year is another 3 to 4 hikes on top these 2 later this year. All of this rate hike talk seems to be causing our customers to start asking for more interest on their deposits. These customers may not be your traditional rate shoppers, but the amount of noise about rising rates is starting to perhaps wake some of those sleepy deposits. So, now that some of your deposits are starting to wake from their very long hibernation, what do you do to help retain what you have and continue to bring in more deposits to keep funding your loan growth? If you haphazardly start offering specials thinking this will just bring in additive funding, you may find that the marginal cost increase is significantly more than what you may think.
We have a marginal cost worksheet that will help you understand the true cost of a deposit strategy. Below is a snippet of the tool to illustrate the concept of what it does. This is a FREE tool to our customers that utilize our BancPath Interest Rate Risk Model. This worksheet allows you to put in your rate change for a deposit term(s) and gives you the ability to assume the retention you expect in your other accounts (cannibalization of deposits), and then calculates how many dollars you add and what the total cost of that funding is. This tool, also, allows you to compare a base case to your best special to a defensive special scenario.
Until you fully understand the true cost of a deposit strategy prior to implementation, offering a deposit special may end up costing you more than you bargained for. If you are currently utilizing our BancPath reporting and what to learn more about this report let us know and we can help. Otherwise, if you aren’t currently utilizing our BancPath reporting and you’re wanting to be able to fully understand how your pricing decisions impact your bottom line, we can help with that, too.
This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.
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