http://www.bloomberg.com/news/2011-06-19/banks-holding-record-1-45-trillion-to-buy-treasuries-as-savings-top-loans.html
Japan’s biggest bond investors see increasing parallels between the nation’s government debt market and Treasuries, indicating that historically low yields in the U.S. have room to fall.
SS says
That means flight to quality.
That means money moving to safe haven short term T Bills as well.
That means fear of deflation.
---
Just as in Japan, deposits at U.S. banks exceed loans, reaching a record $1.45 trillion last month, Federal Reserve data show. As recently as 2008, there were more loans than deposits. The gap is also at an all-time high in Japan, where banks use the money to buy bonds, helping keep yields the lowest in the world even though the country has more debt outstanding than America and a lower credit rating.
Banks pared lending amid more than $2 trillion in losses and writedowns, according to data compiled by Bloomberg. Instead of making loans, financial institutions have put more cash into Treasuries and government-related debt, boosting holdings to $1.68 trillion from $1.08 trillion in early 2008, Fed data show.
The U.S. and Japan are “beginning to look similar because of the fact that we’ve had very low interest rates for a very long time now” Charles Comiskey, the head of Treasury trading at Bank of Nova Scotia in New York, said in an interview. “This is going to be 10 years of pain to de-lever ourselves from the mess of a debt-ridden society that we’ve become.”
“U.S. home prices won’t rebound unless household debt” is reduced, Kato said. “As long as the situation remains the same, bank lending won’t grow. U.S. banks will tighten criteria for borrowers.”
The economy has struggled to recover even though the BOJ buys government securities monthly to lower borrowing costs and stimulate the economy. The efforts have been nullified as banks use BOJ funds to buy bonds rather than lend.
Mizuho’s Takei said there is a “very high chance” that lenders will continue to funnel deposits to the bond market, helping to push Treasury 10-year yields toward 2.4 percent within a few months. Takei said he favors longer-maturity securities.
“Eventually, yields in Japan and the U.S. will converge,”said Mizuho’s Takei. “This is just the beginning.”
Japan’s biggest bond investors see increasing parallels between the nation’s government debt market and Treasuries, indicating that historically low yields in the U.S. have room to fall.
SS says
That means flight to quality.
That means money moving to safe haven short term T Bills as well.
That means fear of deflation.
---
Just as in Japan, deposits at U.S. banks exceed loans, reaching a record $1.45 trillion last month, Federal Reserve data show. As recently as 2008, there were more loans than deposits. The gap is also at an all-time high in Japan, where banks use the money to buy bonds, helping keep yields the lowest in the world even though the country has more debt outstanding than America and a lower credit rating.
Banks pared lending amid more than $2 trillion in losses and writedowns, according to data compiled by Bloomberg. Instead of making loans, financial institutions have put more cash into Treasuries and government-related debt, boosting holdings to $1.68 trillion from $1.08 trillion in early 2008, Fed data show.
The U.S. and Japan are “beginning to look similar because of the fact that we’ve had very low interest rates for a very long time now” Charles Comiskey, the head of Treasury trading at Bank of Nova Scotia in New York, said in an interview. “This is going to be 10 years of pain to de-lever ourselves from the mess of a debt-ridden society that we’ve become.”
“U.S. home prices won’t rebound unless household debt” is reduced, Kato said. “As long as the situation remains the same, bank lending won’t grow. U.S. banks will tighten criteria for borrowers.”
The economy has struggled to recover even though the BOJ buys government securities monthly to lower borrowing costs and stimulate the economy. The efforts have been nullified as banks use BOJ funds to buy bonds rather than lend.
Mizuho’s Takei said there is a “very high chance” that lenders will continue to funnel deposits to the bond market, helping to push Treasury 10-year yields toward 2.4 percent within a few months. Takei said he favors longer-maturity securities.
“Eventually, yields in Japan and the U.S. will converge,”said Mizuho’s Takei. “This is just the beginning.”
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