Balances in cash equivalents grew 18.1% over the past three months. That’s the third-largest quarterly balance growth in the investment portfolio. Collectively, agency MBS and debt remained the largest non-cash investment vehicles. They accounted for 42.2% of the portfolio in the first quarter, which was down 2.9 percentage points from year-end 2017.
Agencies and cash at financial institutions (Fed funds) make up over 77% of the industry’s investment portfolio.
The average credit union yield on investments across U.S. credit unions rose 13 basis points from the fourth quarter and reached 1.79% as of March 31. This is the highest level recorded since Dec. 30, 2010, when it was 1.96%. Total credit union annualized investment income expanded 11.9% quarterly, 22.7% annually, and drove higher the yield on investments throughout 2017 and into the first three months of 2018.
Credit unions' yield on investments increased to an eight-year record high in the first quarter.
Credit unions across the nation benefited from the Fed increasing rates three times in 2017 and twice in 2018. More rate hikes are projected, and priced into the market, for the remainder of the year. As the fed funds rate ticks up across the year, expect to see cost of funds increase as financial institutions reprice deposit and loan products to adjust for the new operating environment.
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