There are a lot of strange things going on in the bank treasury world, and as always, bank treasurers know to prepare for anything. You have a yield curve that is inverted for the longest time in decades, and where the marginal cost to fund a loan makes it difficult to lend profitably. You have high-interest rate volatility as reflected in the MOVE index that, like the inverted yield curve, has persisted for a very long time. None of these things are good for the bank treasury business. But, on the bright side, if you have cash to invest, an overnight risk- free rate from the Fed still cannot be beat, and if you are paid to do nothing, do nothing.

As far as bank treasurers are concerned, a couple of rate cuts at the end of the year would be ideal for trends in their NIMs and NIIs this year. It could certainly help with AOCI recapture. Profits have been under pressure from rising deposit repricing expenses that bank treasurers see as just starting to crest. This month’s newsletter covers these issues and goes through some of the other key topics on the bank treasury agenda, from the Basel 3 Endgame to the fallout from the FHFA’s FHLB100.

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Music by Phantom Sun.