Credit Union Exam Solutions Presents With Flying Colors IRR, the Interest Rate Evironment Credit Union Risk
Aug 12, 2025
The podcast delves into the complexities of the current interest rate environment impacting credit unions. It highlights shifts in yield curves and the effects of Federal Reserve policies and tariffs on investment strategies. Listeners learn about the growing role of Certificates of Deposit and the burden of unrealized losses in portfolios. There’s a deep dive into the burgeoning regulatory demands for stress testing, exploring how credit unions can balance compliance while managing their financial health in a volatile market.
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Tariffs Add To Fed Policy Uncertainty
- Fed officials cited tariffs as a reason to delay rate cuts, adding policy uncertainty to the rate outlook.
- The team links tariff-driven uncertainty to continued caution on short rates and curve shape.
Yield Curve Normalization Eases Margins
- The yield curve swung from -35 bps to +50 bps in a few months, easing margin pressure.
- Todd says a positive 10y-2y spread helps credit unions lower cost of funds faster than asset repricing.
Q1 Cost-Of-Funds And Margin Relief
- Credit unions saw cost-of-funds drop in Q1 2025 and margins improved about 20 basis points since early 2020.
- Todd links this partly to short-end rates moving down and yield curve normalization aiding NIM.