Prudential Securities Inc. has created a product aimed at small to midsize credit unions.
The mortgage-backed securities - called "CUBs," for Credit Union Bonds - have stated maturities of 10 years and are tailored for credit unions.
While large credit unions have participated in the collaterized mortgage obligation market for a long time, smaller ones haven't, noted Ann Kazel, a spokeswoman for Prudential.
Backed by Fannie, Freddie
"They would like this security for its safety, its liquidity and its yield," she said, mentioning the three main concerns credit unions have When making investments.
The bonds have the security of being backed by the Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association.
The yields are greater than those on U.S. Treasury securities or triple-A-rated corporate bonds of comparable duration, Ms. Kazel said.
They cannot extend beyond the stated average life. Also, they cannot extend past the stated final maturity of 10 years.
"Credit unions prefer shorter investments," Ms. Kazel said.
CUBs were designed with Federal Financial Institutions Examination Council rules in mind.
The National Credit Union Administration adopted these more stringent guidelines - used by banks and thrifts - to replace its own rules in July.
The first offering, on Aug. 2, represented $3.2 million of a $750 million CMO issue - and it was sold out. according to Ms. Kazel.