Insights from Catalyst

Jeff Hamilton, Catalyst Corporate Vice President of Member Credit, spoke at the recent CUNA Finance Council Conference at Caesars Palace in Las Vegas, Nevada. His session, on Monday, May 23, focused on loan participations as a winning strategy for credit unions.

With the first quarter of 2022 in the books, analysts at Catalyst Strategic Solutions have seen a large uptick in credit unions seeking to issue subordinated debt. The specific business case for each issuer has varied, but the core underlying drivers have been consistent.

Bonds can help transform your portfolio, but they are not risk-free. Choosing a lower coupon bond over an above-market coupon may not always be the best strategy. Look into one comparison Al Schiliro, a Catalyst Corporate Senior Investment Officer, conducted and the results may surprise you.

The rise in interest rates has caused the values of mortgage portfolios and long-term investments to decline. Some credit unions and board members have said, “Maybe we should stop or slow down our mortgage lending.” My answer to them is always the same: Wait, let’s talk this through first.

With the Federal Reserve signaling to markets that inflation fighting – rather than a focus on full employment – is the imminent mandate, the specter of rising interest rates now looms. High CPI numbers have caused this shift. But is the inflation threat real, given the supply chain effects of the pandemic and long-term rates that remain at levels well below the prior rate cycle?