The Competitive Value of FHLB Des Moines Advances in Today's Financial Market

At a time when stock market giants are struggling to keep afloat, net income for financial institutions is at a 16-year low and net interest margins continue to narrow, easy access to liquidity is particularly critical.

While there are other sources of liquidity in today’s uncertain market, FHLB Des Moines is recognized for its unique characteristics unmatched by other funding providers. Availability, stability and affordable rates are just a few of the benefits that come to mind when one thinks of FHLB advances. Clear proof of the significance of these benefits is the 36.6% increase in the level of advances collectively issued by the FHLBank System in 2007. As more sources of readily available liquidity become scarce, the FHLBank System continues to demonstrate its ability to quickly respond to market fluctuations, as well as member need for low-cost liquidity.

In previous interest rate environments and financial market conditions, FHLB Des Moines was not the only funding alternative available to our members. But when the supply of deposit funds is inadequate or too expensive to meet loan demand, FHLB Des Moines is, by far, the most stable and reliable source of liquidity at very attractive rates.

Brokered Deposits
At times, members use brokered deposits to supplement their liquidity needs. The brokered deposit market is largely driven by the laws of supply and demand which determine availability of funds, terms of maturity and cost. Not only do brokered deposit rates tend to be higher in the falling interest rate environment, the rates quoted by different brokers show a great degree of inconsistency, often ranging between 12 to 15 basis points. Finding brokered deposits with the appropriate maturity to properly match a financial institution’s assets is very challenging in these market conditions. This added complexity makes brokered deposit rates even less attractive.

“Repo” Market
Another source of short-term liquidity commonly used by members is the “repo” market that enables financial institutions to obtain funds by selling securities and agreeing to repurchase them when the agreement matures. Since mid-February, conditions in the repo market have tightened significantly, making it more difficult for financial institutions to use this source to meet their day-to-day cash needs. As a result of the sharp devaluation of some securities, lenders are no longer willing to take certain types of assets as collateral or are demanding a higher interest rate to offset the potential risk of those assets losing their market value.

FHLB Des Moines Advances
FHLB Des Moines advances will help you get through the turbulent times of today’s market and ensure successful management of your interest-rate risk and loan growth. For more information about FHLB Des Moines advance rates, please visit our Daily Rates Guide at http://www.fhlbdm.com/rates/rates.htm or call the Money Desk at 800.544.3452, ext. 1013.