Recommended Liquidity Curve

What is the Recommended Liquidity Curve?

PrecisionLender allows you to enter Liquidity Adjustments to the funding costs. This permits variance in the cost of funds (“COF”) for floating and adjustable rate loans that have longer durations. PrecisionLender believes it is important to use liquidity adjustments in pricing longer term floating and adjustable rate loans. Clients should develop their own curve using appropriate methods, but the following liquidity curve is provided for our clients that would like to use liquidity adjustments but are uncertain how to develop them.  This curve will typically be updated by the first and third Tuesday of each month. If you'd like to be notified via email when this curve is updated, please let us know at


Duration Recommended Adjustment
3 months 0.00%
6 months 0.00%
9 months 0.00%
1 year 0.00%
18 months 0.05%
2 year 0.10%
2.5 year 0.15%
3 year 0.20%
4 year 0.25%
5 year 0.30%
7 year 0.35%
10 year 0.42%
Over 10 years 0.42%

Last updated 09-21-2020


Method to Determine the Recommended Liquidity Curve

While there are a few alternatives used to determine a liquidity curve, PrecisionLender uses the following method:

  • We determine a current COF curve based on brokered CD rates of different maturities.
    • The idea is that the “all-in” (including commission) brokered rates represents the cost to raise various maturity funds without collateral support or other restrictions.
  • We receive brokered CD rate indications from at least 3 sources, including:
    • Wells Fargo
    • FTN
    • Raymond James
  • We take an average of the data received from these various suppliers.
  • We subtract a “risk free rate”, the LIBOR/Swap curve from this average.
    • We use the 1-year swap rate and not the 1-year LIBOR rate that some institutions use in determining a Liquidity Premium.
  • We may make minor adjustments to this calculation for rounding purposes.
  • Example: if the average of 5-year brokered CDs is 2% and the Swap curve at this point is 1.40%, the liquidity premium for this term is 0.60%.


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