Leading US Banks Are Taking Different Bets on Potential Direction of Interest Rates

Source: FT

The biggest US banks are seeking dramatically diverse strategies for investing their trillions of dollars of deposits in the government debt markets, indicating the debate on Wall Street. DXY up +0.11%, EUR USD down -0.02%

• One side of the debate is Bank of America that helped bolster its Q3 revenues by generating interest from a debt security portfolio that has expanded 77% over the last year and stands at $970billion.
• On the other side is JP Morgan Chase that sits on a smaller size and is more pushed to park deposits at the Federal Reserve rather than purchasing overpriced Treasuries.
• The divergent strategies brought out disclosure to an earnings season that the leading banks benefited from the contract-making boom on Wall Street.
• Jason Goldberg, a bank analyst at Barclays, stated that banks are taking various strategies related to their balance sheet and managing interest rates.
• The dilemma for the banks is the struggle to use all the deposits that increased pressure on their balance sheets as government stimulus and quantitative easing programs were launched during the health crisis.