American Banks Pile Up Treasuries as Deposits Surpass Loans (4)
(Updates 10-year yield in fifth
By Susanne Walker
Oct. 6 (Bloomberg) -- American banks are
loading up on U.S.
government debt, a sign they remain cautious on the
with the jobless rate at a six-year low and corporations
their healthiest in a generation.
Commercial lenders increased their
holdings of Treasuries
and debt from federal agencies in September by $54
billion to an
unprecedented $1.99 trillion, data from the Federal
show. Banks have now been net buyers for 12 straight months.
of America Corp. and Citigroup Inc. are among the
lenders adding government
bonds this year as loan growth fails
to keep up with record deposits and
banks prepare for rules that
take effect in January requiring them to hold
assets. While companies in the Standard & Poor’s 500
earning more than ever and carrying the lowest debt burdens
at least 24 years, the buying suggests that loan officers are
sanguine over the outlook for the U.S. economy.
“There’s extra cash the banks
have to put to work,”
George Goncalves, the head of interest-rate strategy at
Holdings Inc., said by telephone Sept. 29. “It’s not being
utilized because of less demand, but also the banks have
to be much safer,”
which is why they’re buying Treasuries.
The banking industry’s appetite for
U.S. government bonds
has helped Treasuries gain 4.2 percent this year and
yields on the benchmark 10-year note by more than half
percentage point to 2.42 percent as of 11:55 a.m. in New
Banks’ holdings of U.S. government debt
last month by the most since 2010, even as Treasuries slumped
deepening concern the Fed would end more than six years of near-
rates sooner than some investors expected. The 0.6 percent
decline was the
biggest monthly loss of 2014.
Futures traders are now pricing in a 52 percent
central bank will increase its target rate in July.
culling government bonds last year for the first time
since 2007, lenders
have added almost $180 billion this year,
data compiled by Bloomberg show.
Banks have stepped up their
bond purchases as deposits have ballooned to
the most since the Fed data starts in 1973.
accumulated so much cash that deposits exceeded
loans by the most on record
last month. That gap has widened by
more than $300 billion in the past
Bank of America, the second-biggest U.S. bank, has more
quadrupled its available-for-sale holdings of Treasuries
and federal agency
debt this year to $38.7 billion as of June
30, the latest company filings
compiled by Bloomberg show.