Despite deposit yields remaining at near historic lows, it has not discouraged members from seeking the safe haven of insured deposits.
Member savings are up 4.2% year to date and 6.2% on an annual basis, according to CUNA Mutual Group's July Credit Union Trends Report, which tracked data through May. First quarter data revisions increased savings estimates by $3.9 billion.
Members' choice of deposit accounts indicates yield is not a primary consideration, wrote Dave Colby, chief economist at CUNA Mutual, in the report. Rather, there may be “a renewed sense of caution by members with respect to protecting their financial assets in these times of economic and political uncertainty,” according to Colby.
Since May 2011, share draft balances were up 10.7% and regular shares grew 12.2%. Both of these accounts are paying less than 0.28% annually, Colby said. Money market accounts with a current national average yield of 0.41% climbed 7.9% during the past year and certificates of deposit declined 2.8%.
The yield spread between a one-year CD and money market account has now declined just more than a half a percentage point, and now is roughly one third of what it was at the beginning of the recession, Colby said.
“While rates are at historic lows, credit unions will need to closely monitor local competitive conditions as above market yields will trigger additional large deposit inflows,” Colby cautioned.
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