November 20, 2023

Surging FHLB Advances Point to Need for a True Reflection of Overnight Lending and Borrowing Costs

The latest data from the Federal Reserve Bank of St. Louis is clear: FHLB advances are back on the rise. After sharp declines caused by the 2008 financial crisis and the COVID-19 pandemic, with a gradual recovery period sandwiched in between, activity in this market has risen sharply over the past year, with Q1 2023 seeing the most total value advanced in any quarter to date.

The implication is clear: with lending and borrowing activity increasing like never before, banks need a true reflection of their overnight lending and borrowing costs. With AMERIBOR – a credit-sensitive rate derived from transactions on the AFX Marketplace – they can achieve this more accurate perspective and apply it for optimal loan origination, asset-liability management and more. By putting a spotlight on credit sensitivity, we are adding choice to the market, enabling financial institutions – particularly regional and local banks – to select a benchmark interest rate that best meets their unique loan funding needs.

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