, Columnist
Banks Wrestle With Trillion-Dollar Bond Market Dilemma
The pandemic fattened lenders’ securities holdings. With interest rates rising, the question is: Now what?
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Inside every bank there’s a hedge fund dying to get out. Third-quarter earnings that are now rolling out should provide an insight into how they’re doing.
US banks’ securities portfolios ballooned during the pandemic, as deposits surged thanks to government support for households and businesses. With insufficient loan demand to soak up the flows, the excess fell to banks’ internal investment arms to manage. For every $100 that poured into the system via deposits since the end of 2019, only $35 went into traditional lending and the rest went into banks’ investment portfolios.