For many consumers, paying down debt may be more of a concernthan finding the best rates on deposit accounts.
|From a household balance sheet and cash flow perspective, debtreduction provides a significantly higher return, according to theNovember Credit Union Trends Report from CUNA Mutual Group.However, from a credit union perspective, deposit yields continueto be managed lower.
|“The lack of loan demand implies new deposit inflows must gointo investments. The combination of assessments on deposits andshort-term investment yields below the average cost of fundstranslates into negative spreads on most new money,” wrote DaveColby, chief economist at CUNA Mutual.
|Given the low rate environment, members can choose liquiditywithout sacrificing significant yield, Colby noted. Approximately120% of deposit growth over the past year is attributable to sharedrafts, regular shares and money market accounts, according to thereport. Current national average yields on these accounts are0.37%, 0.41% and 0.70%, respectively.
|Colby said going forward, credit unions can expect strongerdeposit growth by year-end primarily due to payroll timing. Savingsand asset growth are forecast to slow in 2011 due to the lowinterest rate environment, credit unions will continue to closelymanage growth to protect key ratios and a slight economicimprovement late in the year.
|“While the probability of a double-dip recession has edged down,no environmental lift is forecast for the next 12 to 18 months,”Colby wrote.
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