What If Short-Term Rates Rise?
The "ebrokers are most levered to higher short-term rates as much of the client cash is invested relatively short term," Meredith said. "With average durations of ~2 years, longer-term rates will also have an impact as the portfolio rolls over. We estimate that a 200bps rise in the Fed funds rate would increase SCHW's earnings by about 115%. The impact for AMTD is somewhat lower at 45%."