Note from my bank today that due to market conditions my MM rate went down another 10 basis points. Can someone explain this as it was my understanding the federal funds/benchrate rate was staying the same?
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My bank MM down another 10 basis points???
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Last: 21 days ago by Stive
Yeah I think 1 year cd rates are down to about 4 percent.
More deposits than quality loans I will guess.
More deposits than quality loans I will guess.
I think bank is anticipating the Fed cutting rates. So the rate cuts is "priced in".
Bessent was on Bloomberg this morning and said he expects a 50 point cut in September and that we need to be 150 pts lower.
The open market for fed securities also impacts what the rate is and the open market is pricing in a cut.
The bank may also be lowering the rate because they're trying to lower their cost of funds and are ok with losing some deposits that are only there because of a high rate.
cgh1999 said:
The bank may also be lowering the rate because they're trying to lower their cost of funds and are ok with losing some deposits that are only there because of a high rate.
I get that but dont they need those high dollar deposits for lending purposes and/or to demonstrate to the regulators the strength of the bank?
Is it normal for a bank to offer a higher than market rate to a high dollar customer with large deposits? Like those with over $5mm?
BoDog said:
Is it normal for a bank to offer a higher than market rate to a high dollar customer with large deposits? Like those with over $5mm?
It's not ideal. Usually there is a cap on how much they'll allow at a higher rate. It's a double whammy for the bank. Paying a lot in interest...and if the deposits are interest rate sensitive then you'd have a higher likelihood of losing them if the rates dropped.
BoDog said:cgh1999 said:
The bank may also be lowering the rate because they're trying to lower their cost of funds and are ok with losing some deposits that are only there because of a high rate.
I get that but dont they need those high dollar deposits for lending purposes and/or to demonstrate to the regulators the strength of the bank?
Maybe. But if they are having to pay high interest rates, it doesn't demonstrate strength.
BoDog said:cgh1999 said:
The bank may also be lowering the rate because they're trying to lower their cost of funds and are ok with losing some deposits that are only there because of a high rate.
I get that but dont they need those high dollar deposits for lending purposes and/or to demonstrate to the regulators the strength of the bank?
Or lending demand is slowing down and their need to keep/collect deposits is dropping.
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