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If December’s dismal job number is any indication, 2008 could turn out to be a difficult year for the U.S. economy and for the financial services industry in particular. Net interest margins, already under pressure, are expected to continue to decline. Competition for deposits is fierce in many markets, and many institutions continue to offer CD specials well in excess of the fed funds target rate of 4.25 percent.

HLB Option advance pricing for quarterly calls is extremely attractive at the moment and current structures with a 10-year maturity and a three-month lockout are priced at 2.38 percent as of January 14, 2008, a full 187 basis points below fed funds.

Members currently borrowing on an overnight or short-term basis might consider moving a portion of these positions into HLB Option advances with short lockouts.

Members with brokered CD maturities could consider HLB Option advances with shorter final maturities in the two- to three-year range with one- or two-year lockouts at rates considerably below brokered CD rates.

In this challenging environment, members should be diligent and try to squeeze every basis point possible out of the margin.

These are just a few of the structures FHLB Boston offers, and we encourage members to call the Money Desk at 800-357-FHLB (3452) with any questions or interest. HLB Option advance indications are available here.