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What is the FHLB Composite Curve?

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PrecisionLender creates the FHLB Composite Curve using rates from the six regional Federal Home Loan Banks that make their rates public.

  • As with all supported funding curves, PrecisionLender updates the FHLB Composite Curve nightly
  • The FHLB Composite Curve is meant to provide a good proxy for banks' marginal, market opportunity cost of funds

The following short video describes how the FHLB Composite Curve is created, and who uses it...

 

 

Video Transcript:

PrecisionLender has access to the cost of funds for six regional Federal Home Loan Banks (FHLBs). These are the FHLBs for Boston, Chicago, Dallas, Des Moines, New York and Topeka. If at least three of these provide a rate for a specific duration, PrecisionLender calculates an average rate and uses it in creating the FHLB Composite curve.  Durations that do not have 3 rate data points are not included in the FHLB Composite curve, and PrecisionLender does a linear interpolation to generate the cost of funds rate for that duration, as it does for any other funding curve that does not have a stated rate for a specific duration. The FHLB Composite curve is meant to provide a good proxy for a bank's marginal, market opportunity cost of funds, and it is the funding curve that the majority of PrecisionLender customers choose to determine cost of funds (the Interest Expense within PrecisionLender). As with all of the funding curves supported in PrecisionLender (with the exception of custom funding curves which are updated on a customer established schedule) the FHLB Composite curve is updated every night.

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