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This index reflects the weighted-average interest rate paid by 11th Federal Home Loan Bank District savings institutions for savings and checking accounts, advances from the FHLB, and other sources of funds. The 11th District represents the savings institutions (savings & loan associations and savings banks) headquartered in Arizona, California and Nevada.
Since the majority of the index is based on savings account interest rates, it is very stable. It is the least volatile between the three, LIBOR, MTA and COFI. Also in my opinion it is the easiest to explain to the consumer. You're telling them this is an index based on savings and checking accounts..everyone understands that and knows that they pay nothing in interest...vs the LIBOR which I can't even try to explain a London based...and try to make it sound as easy to understand.
Even with COFI being a little more stable, I have been using the MTA, 12 month rolling average of the 1 yr t-bill lately. Being that it is a 12 mnth average keeps it from moving quite so fast, although this year has gone up quite a bit. The reason I have been using that is that the margin(fixed component) is lower than the COFI, so if you look at a fully indexed rate over the long term, the MTA goes up faster than the COFI, but also comes down faster too and the fully indexed rate is lower.
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