Businessweek reports that the gap between U.S. bank deposits
and loans is growing at the fastest pace in two years, providing lenders with
more funds to buy bonds and temper the biggest sell-off in Treasuries since
2010. As deposits increased 3.3 percent
to $8.88 trillion in the two months ended July 31, business lending rose 0.7
percent to $7.11 trillion, Federal Reserve data show. The record gap of $1.77
trillion has expanded 15 percent since May, the biggest similar-period gain
since July, 2010. Banks have already bought $136.4 billion in Treasury and
government agency debt this year, more than double the $62.6 billion in all of
2011, pushing their holdings to an all-time high of $1.84 trillion.
Faced with a slowing U.S. economy, unemployment above 8
percent for more than three years and regulations forcing them to hold more and
higher-quality assets, banks are lending at below pre-recession levels. The
bond purchases help explain why even after rising this month, Treasury 10-year
note rates are about half the 3.5 percent median forecast of 43 economists in a
Bloomberg survey a year ago…..
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