Catalyst News

Results and Takeaways from Catalyst’s Two-Part Derivatives Webinar

by Catalyst Corporate | Apr 29, 2024

Over 100 credit union attendees participated in Catalyst’s Derivatives Symposium April 10 and 11. The two-day online event featured presentations by in-house speakers and esteemed financial experts from Goldman Sachs, HedgeStar, Eris Innovations and the NCUA. Presenters discussed the current and expected state of the economy, high-level credit union hedging strategies and other helpful insights.

Catalyst Managing Principal Mark DeBree served as the panel moderator and conducted poll questions throughout the online event. According to the results, credit unions were either looking to kickstart a hedging program at their institution or seeking assistance in strategy development.

Overview of live poll responses:Poll Question_When will the Fed make their first move

  • 74% of attendees still anticipate that the Federal Reserve will begin cutting interest rates later in 2024 but expected timing of the first cut was nearly split between Q3 and Q4. The remaining 26% of attendees are not expecting the first cut to occur until 2025 or later.
  • A vast majority of attendees (75%) cited margin compression as their primary concern in the face of falling interest rates and are leaning towards derivatives as a tool to help manage risk. The remaining 25% indicated their current NEV exposures were elevated; and are considering hedging strategies to manage down the risk level.
  • Over half of attendees (62%) reported feeling comfortable with interest rate derivatives as a risk management tool.

The takeaways

These key responses indicate that a majority of attendees anticipate a decrease in interest rates later this year and expressed concern regarding margin compression if this occurs. Although a portion of attendees are familiar employing interest rate derivatives as a tool to manage such risks, others expressed a need for further education before adding it to their toolkit. Historically, interest rate derivatives have not been a focal point for credit union use in managing risk, which explains the shortfall of familiarity.

Catalyst values assisting credit unions in crafting advanced strategies to manage risk exposures, building knowledge bases within management and ALCO ranks, and helping board members become more familiar with derivatives.

Don’t let the change in rates catch your earnings profile by surprise. The Derivatives Symposium, now available on-demand, provides an baseline for learning how interest rate derivatives can help your credit union create a strong risk management program.