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Chelsea Bank outlines options to free cash but warns of lower sweep returns
Summary
Chelsea Bank told Bolton’s finance committee it can lower the $5 million sweep checking target to $3 million (estimated municipal sweep rate ~3.00%) or $2 million (~2.75%), which would free cash for bond payments or grants but reduce interest income and could raise monthly fee exposure.
Chelsea Bank representatives outlined two account-structure options to Bolton’s Finance Committee that would free cash now but reduce the town’s investment yield. At the meeting, Alexis Khan of Chelsea Bank presented side-by-side scenarios showing the effect of lowering the town’s sweep checking target balance from $5,000,000 to $3,000,000 or $2,000,000.
Khan said the bank projected the municipal investment sweep rate would move to about 3.00% if the target balance were lowered to $3,000,000 and about 2.75% at a $2,000,000 target; the account’s current applied rate is 3.75% under the existing relationship. The committee heard examples that estimated the town…
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