This is why going longer on investments is a good idea!

What are most cu's getting for their Investments now?  1% or 2% if they are lucky.  

REAL investment I made in 4/2010 that was called 10/2010:  Purchased at a start rate of 3% that eventually went to 7% over an 8-year period.   That's right, 8 years.  "HOLY COW!"... that's a long time for a cu investment you say.  Our policies won't allow us to go that long.  The auditor and the regulator says we should stay short as rates are going to go up (Unless he/she has a much clearer crystal ball than I do.. I see them staying down for a while).  We can't do that... it's un-credit-union-like (Like buying CMO's was? Or the  Interest-only-payment-optional-negative- amortized loans were not doomed from day #1?).  

Oh yeah, I forgot.. I bought it at a discount:  99.4% of face.  You could never get that at your Corporate.  AND, heaven forbid you had to access your funds, you would be charged an early redemption penalty.  

Ok... So it was called... I originally picked up $250K of this bond.  I wish I had purchased more!   I earned 3% for 6 months plus a $1,500 bonus when it was called at par.  My total return for the holding period?  4.20% -  purchased just 6 month ago.

But you have to reinvest it you say.  What will be the return then? Actually, this one stayed home.  My members are paying down their debts and our shares are being withdrawn so I didn't reinvest.  But, had I only received 1% for the rest of the year, my yield would have been 2.60% for one year... How are you doing?  If I had received 2% on a new step-up, my yield for the year would have been 3.10%.  Not too bad in this market.  

A funny thing happened at my regulatory review this year.  I had marked-to-market my Bank CD's.  I held them in Available for Sale and they have market values.  The two regulators at first said, Bank CD's don't Mark to Market.  Then I showed them the ratings and then they agreed with me.  I actually have a bunch of 5-year bank cd's I picked up a few years ago.  They are yielding 5% and have 3 more years of life left in them... I bought all I could get my hands on at the time.   They are all purchased at par, but the market value is 111% of par. Think about it.  What's a 5% 3-year investment worth now?  Back to the regulator... They wondered why more cu's didn't do this.  I don't know, but they sure purchased the heck out of corporate cd's that were paying much less, had no market value, and couldn't be sold.  My old corporate used to have a webinar for cu's about investing... it was the most condescending blather I ever heard.  They wondered out loud about step-up's. " Who would be so STUPID as to purchase one of those?  Let me tell you how much better our own investments are (YEAH, WE ALL NOW KNOW THE TRUTH OF THAT PROPAGANDA!).  We are the experts and the naive cu's need us to protect them.  OOPS, I used a big investment term here, I better back up and inform the poor slobs at the cu what that means... they OBVIOUSLY don't have a clue what that means. "  

Even if the new regulations for Corporates allows for purchasing of corporate cd's... THIS CU NEVER WILL - BECAUSE THEY NEVER EVER MADE ANY SENSE IN THE FIRST PLACE!

This hurts to say this, but NCUA actually did many cu's a favor.  Now they will go out there and search and find investments that actually pay better and serve them better than what the corporates were ever offering.  

The complacency of cu's, along with the "We built it, so it must be the best" mentality has cost us dearly.  $16 Billion at last count!