May 26, 2022

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Credit says US banks’ focus on lending could affect treasuries …

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NEW YORK (Reuters) – As the Federal Reserve (Fed) plans to shrink its debt portfolio and raise interest rates against inflation, companies ‘focus on credit growth could ease US banks’ appetite for U.S. treasuries, said Jolden Poser. Analyst at Credit Suisse.

Low demand for long-term U.S. treasuries is likely to put further pressure on yields, which have already risen this month, as investors adjust to expectations that the central bank will tighten monetary policy more aggressively.

The central bank’s asset purchases contributed to unprecedented cash flow and trading activity during the epidemic, but the operating income of Wall Street’s top banks fell in the fourth quarter, markets normalized and the US Federal Reserve began to reduce its asset purchases, resulting in lower trading volume. .

Bank of America on Wednesday announced a 30% increase in quarterly profit (better than expected).

JPMorgan announced a 6% expansion in debt last week as its operating income fell, and Goldman Sachs announced lower-than-expected quarterly earnings on Wednesday, hit by weaker business earnings.

“Our perception that bank portfolios can easily absorb US Treasury output amid high liquidity and sluggish credit growth is now changing as credit growth has reversed and QT (austerity) is approaching,” Pozsar said in a statement on Wednesday.

(By David Barbucia)

Source:

Reuters

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