October 13, 2026

Reading the Cycle: Now What Can We Do From Here?

An exclusive webinar on demand from Credit Union Investment Strategy Group hosted in partnership with The Credit Union Connection.

Register here to watch!

If your credit union’s cash and investment portfolio are feeling the pinch of today’s intense market volatility, you are far from alone. Between fluctuating Treasury yields, global bond market swings, and the eternal guessing game of what the Fed will do next, managing balance sheet strategy can feel like trying to hit a moving target.

In a recent expert session hosted in partnership with The Credit Union Connection, Kevin Lynch, Managing Director at the Credit Union Investment Strategy Group of Oppenheimer & Company, Inc., broke down how credit union CEOs, CFOs, treasurers, and ALCO members can build resilient investment portfolios for whichever way the interest rate cycle breaks.

With over 150 years of combined experience working exclusively with credit unions across five recessions, Lynch’s framework focuses on actionable strategies rather than crystal-ball forecasting.

Here are the key takeaways from the session:

1. Market Color: Understanding the Current Volatility

Yields have been moving aggressively, with the 10-year Treasury testing historic highs relative to the last 25 years. Lynch points out that while the front end of the yield curve reacts immediately to Fed monetary policy (such as recent 25-basis-point hikes aimed at keeping policy in restrictive territory to fight inflation), the long end is heavily driven by market sentiment and inflation fears.

The Quick Board-Room Trick: Want to know what the bond market expects the Fed to do next without guessing? Take the 2-year Treasury yield, subtract the current Fed funds rate, and divide the difference by 25 basis points to see how many rate hikes or cuts the market is currently pricing in.

2. Strategy One: The Barbell Approach for Uncertain Times

When you don’t know whether rates are heading higher or lower, a barbell strategy helps cover your bases by splitting investments between the short end and the long end of the curve:

The Short End: Provides critical liquidity and flexibility. If rates rise, cash rolls off quickly to be reinvested at higher yields or deployed into high-yielding member loans.
The Long End: Locks in attractive yields today, protecting the portfolio if market rates drop from here.

3. Strategy Two: Maximizing Mortgage-Backed Securities (MBS)

MBS can provide a steady stream of monthly principal and interest cash flow, acting as a powerful tool in a rising-rate or volatile environment. Lynch highlights two distinct approaches depending on your risk appetite:

Yield Protection: Focusing on the highest coupon possible (e.g., locking in a 5.5% to 6% coupon under par) while strictly staying under par to minimize the drag of amortization. Because the steady coupon is doing the heavy lifting, it provides consistency and calm to the portfolio regardless of external market volatility.
Yield Enhancement: Utilizing discounted, low-coupon MBS pools (like a 5% coupon bought at a discount) where faster prepayment speeds accelerate the income-boosting benefits of discount accretion. Note: While yield enhancement can supercharge returns if prepayments surge, Lynch cautions that yield protection is the go-to play for foundational stability, especially given extension and reinvestment risks.

Why Portfolio Strategy Matters Right Now

Ultimately, portfolio management isn’t about predicting the exact path of interest rates—it’s about making sure your investment portfolio and cash positions actively contribute to your bottom line to protect net worth ratios without having to resort to unpopular member-facing moves like hiking loan rates or slashing share certificate yields.

Register here to watch this webinar on-demand!

Want to dive deeper into active portfolio management, low-coupon MBS offerings, and avoiding common bond traps? Check out the full series of articles below!