Why does the COFI move differently than market interest rates?
The movement of COFI is affected by a number of factors, such as changes in market interest rates, the sources of funds used by the COFI Reporting Members, merger and acquisition activities, and changes in accounting rules or regulatory reporting instructions. In general, the COFI has not moved up or down as rapidly as market interest rates (such as the prime rate, the discount rate, or Treasury bill rates) because some COFI Reporting Members rely on fixed rate deposits with medium- and long-term maturities as a primary source of funds. Because rates on these deposits are not affected by changing market interest rates until the deposit matures, the total interest expense paid by savings institutions in a particular month may reflect interest rates that were prevalent in previous months or years. Merger and acquisition activity can affect interest expense if the activity results in an unrealized mark-to-market gain or loss on funds acquired by a COFI Reporting Member. The composition of
