Is It Time to Extend Maturities?

The Federal Home Loan Bank of Boston's Money Desk.

Recent gains in the bond market provide an excellent opportunity to extend liability maturities using advances of four years or longer. With these advances at or near July 2003 levels, moving out the yield curve now offers low-cost protection against future rate increases.

Members offering aggressively priced CD specials in the nine- to-12-month sector should be tracking the internal shifting of deposits into the special. The marginal cost of growing deposits can exceed 3 percent with as little as 30 percent cannibalization.

If you are exposed to rising rates, Federal Home Loan Bank of Boston advances of about fours years offer more protection at the same marginal cost.

A model to help you determine the marginal cost of paying up for non-rate-sensitive deposits to retain rate-sensitive deposits is available on FHLB Direct, the Bank's online account-information and transaction service.

This is also a time to consider locking in spreads on longer-term portfolio assets booked over the past year and funded with short-term liabilities.

Discuss your opportunities with the Money Desk at the Federal Home Loan Bank of Boston. We are always willing to offer the right funding for your risk-management objectives. Talk to us at 1-800-357-FHLB.