The Banking and Strategy Initiative

Chillin' out till it needs to be funded

The Thursday Fed Update: Another MaidenLane sale, another week, Bank Credit weak in June

Pelli's Wells Fargo Center, Minneapolis, Minne...

Pelli’s Wells Fargo Center, Minneapolis, Minnesota, 1989. Jon Davis (Photo credit: Wikipedia)

The Reserve Bank Credit remains anemic in growth at $8.6B while total assets fell by $10.5 B even as The Fed added $8-9B more in MBS purchases as the Maiden Lane III securities the Fed is holding were auctioned off to the extent of another $6.9 B

Reserve Bank Credit or the size of the Fed’s Balance sheet is $2.858 B even as the latest 10 Y TIPS auctions retrieved a better demand from International investors and awarded a negative -0.632% yields. Yet demand is trending down

Commercial credit has not been growing as banks are yet deleveraging outside of JP Morgan and maybe Wells Fargo in mortgages. BofA did only $18 B in mortgages this quarter though it was a tremendous improvement over last quarter. Corporate credit demand is also low and net yields at the banks have been under pressure as cost of borrowing for banks has zoomed up by up to 20% and Return on Equity targets were nearly  in single digits again except at JP Morgan

The Fed Balance sheet shows its holding of Treasuries largely concentrated in the 5-10 yr denomination and beyond in the H.4.1 report

The H.8 report on Bank credit earlier on Friday reported only 2.7% growth in Bank credit in June after a “better” 5.2% and 4% growth i nthe first two months of the quarter CRE loans have been winding down while Trading, Interbank and Cash holdings of banks have been growing multifold to sustain a 16% growth over last year However Deposits have also grown by a large 10% in June and bank borrowing is winding down at 3.3% probably a sign of weaker demand for lending as cash holding remain at $1.66 T and Commrcl and Industrial Loans at $1.4 T  with Consumer loans at $1.1 Tln and another $1.5Tln in Closed end residential loans that should continue to grow for the Housing crisis to point up




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