US Treasury&rsquo s $1tn borrowing drive set to put banks under strain Analysts fear scale of new issuance following debt ceiling fight will push up yields and suck cash out of deposits

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A $1tn US government borrowing spree is set to increase the strain on the country&rsquo s banking system as Washington returns to the markets in the aftermath of the debt ceiling fight, traders and analysts say. Following the resolution of that dispute &mdash which had previously prevented the US from increasing its borrowing &mdash the Treasury department will seek to rebuild its cash balance, which last week hit its lowest level since 2017. JPMorgan has estimated that Washington will need to borrow $1.1tn in short-dated Treasury bills by the end of 2023, with $850bn in net bill issuance over the next four months. A principal concern voiced by analysts was that the sheer volume of new issuance would push up yields on government debt, sucking cash out of bank deposits. &ldquo Everyone knows the flood is coming,&rdquo said Gennadiy Goldberg, a strategist at TD Securities. &ldquo Yields will move higher because of this flood. Treasury bills will cheapen further. And that will put pressure on banks.&rdquo He said he was expecting the biggest increase in Treasury bill issuance in history, apart from during crises such as the 2008 financial meltdown and the pandemic in 2020. Analysts said the bills would have maturities ranging from a few days to a year. The Treasury department offered guidance on Wednesday, saying it aims to return its cash balances to normal levels by September. JPMorgan said the announcement was roughly in line with its overall estimates. The Treasury also said it would &ldquo carefully monitor market conditions and adjust its issuance plans as appropriate&rdquo . Yields had already begun to rise in anticipation of the increased supply, added Gregory Peters, co-chief investment officer of PGIM Fixed Income. That shift increases pressure on US bank deposits, which have already fallen this year as the rise in interest rates and the failure of regional lenders have sent customers seeking higher-yielding alternatives. Further deposit flight and the rise in yields could in turn push banks to offer higher interest rates on savings accounts, which could be particularly costly for smaller lenders. &ldquo The rise in yields could force banks to raise their deposit rates,&rdquo Peters said. Doug Spratley, head of the cash management team at T Rowe Price, concurred that the Treasury&rsquo s return to borrowing &ldquo could exacerbate stresses that were already on the banking system&rdquo . The supply shock comes as the Fed is already winding down its bond holdings, in contrast with the recent past, when it was a big buyer of government debt. &ldquo We&rsquo re running a significant budget deficit. We still have quantitative tightening. If we have a flood of T-bill issuance as well, we likely have turbulence in the Treasury market in the months ahead of us,&rdquo said Torsten Slok, chief economist at Apollo Global Management. Bank customers have already heavily shifted to money market funds that invest in corporate and sovereign debt following the bank failures this spring. The stock of funds in money market accounts reached a record $5.4tn in May &mdash up from $4.8tn at the start of the year &mdash according to data from the Investment Company Institute, an industry group. But while money market funds are typically big purchasers of Treasury bills, they are unlikely to buy up the whole supply, analysts said. This is largely because money market funds already receive a generous risk-free return &mdash at present an annualised 5.05 per cent &mdash on overnight funds left with the Fed. This is only slightly below the 5.2 per cent available on the comparable Treasury rate, which carries more risk. At present, roughly $2.2tn a night is being put into the Fed&rsquo s overnight reverse repurchase agreement facility (RRP), much of it from money market funds. Recommended US economy What a debt ceiling deal means for the US economy That cash could be redeployed to buy Treasury bills if they offered significantly higher returns than the Fed&rsquo s facility, analysts said. But the RRP rate moves with interest rates. So if investors expect the Fed to continue to tighten monetary policy, they are likely to keep their cash parked with the central bank overnight, rather than buying bills. &ldquo While [money market funds] with RRP access could buy some T-bills on the margin, we believe this will probably be small relative to other investor types [such as corporations, bond funds without access to the RRP facility and foreign buyers],&rdquo Jay Barry, co-head of interest rate strategy at JPMorgan, wrote in a note. Last week&rsquo s blockbuster headline employment figures for May have added toPlease use the sharing tools found via the share button at the top or side of articles. 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Last week&rsquo s blockbuster headline employment figures for May have added to the pressure by boosting investors&rsquo expectations that further rate rises are coming &mdash which could diminish appetite for government debt at current rates. Event details and information The Global Boardroom Online 08 November - 10 November 2023 Strategies for Growth and Disruption Presented byFT Live Copyright The Financial Times Limited 2023. All rights reserved. Lates
https://www.youtube.com/watch?v=dGg8gK7K_24

https://www.marketwatch.com/investing/stock/c

https://finance.yahoo.com/news/treasury-department-may-issue-1-032015994.html

https://www.marketwatch.com/investing/stock/c

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https://www.marketwatch.com/investing/stock/gs?mod=search_symbolhttps://www.marketwatch.com/investing/stock/axp?mod=search_symbol

https://www.marketwatch.com/investing/stock/wfc?mod=search_symbol

https://www.marketwatch.com/investing/stock/bac?mod=search_symbol

 

https://investors.sgx.com/_security-types/stocks/O39

 

https://www.dividends.sg/view/o39

 

vs

 

http://aastocks.com/en/stocks/analysis/company-fundamental/dividend-history?symbol=03988

http://www.hp.gov.cn/2021gb/zz/zwyw/tpyw/content/post_8910959.html

 

https://asia.topnews.media/2023/06/26/singapore-and-guangdong-are-expanding-cooperation-in-sustainable-development-digital-economy-health-care/

https://w.media/chinese-premier-in-germany-urges-enterprises-to-lead-de-risking-decisions/

 

https://dgap.org/en/research/publications/china-de-risking

https://www.aljazeera.com/economy/2023/5/29/japans-nikkei-hits-33-year-high-on-weak-yen-us-optimism

 

http://aastocks.com/en/stocks/analysis/company-fundamental/dividend-history?symbol=03988

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https://edition.cnn.com/2021/07/27/investing/tencent-meituan-chinese-tech-stocks-intl-hnk/index.html

https://www.wsj.com/articles/ftx-and-sam-bankman-fried-your-guide-to-the-crypto-crash-11669375609

https://edition.cnn.com/2023/01/09/economy/china-economy-guo-shuqing-ant-group-intl-hnk/index.html

 

pre-emptive investing

https://www.thetimes.co.uk/money-mentor/article/is-bitcoin-crash-coming/

Asia: Markets fail to build on rally with eye on China policy

https://www.cnbc.com/2020/03/15/federal-reserve-cuts-rates-to-zero-and-launches-massive-700-billion-quantitative-easing-program.html

 

https://www.reuters.com/markets/us/bofa-expects-two-more-interest-rate-hikes-fed-growth-q4-2023-06-15/

https://www.investopedia.com/fed-squeezes-inflation-and-economy-harder-with-a-tenth-possibly-final-rate-hike-7488377

https://www.dailyforex.com/forex-news/2023/05/united-states-raises-interest-rates-again-4-may-2023/195084

ASKING prices for British homes fell in June for the first time in six years, indicating an earlier-than-usual summer slowdown amid mortgage market turmoil and expectations of further Bank of England interest rates increases, a survey showed on Monday.
Property website Rightmove said the drop was very small - £ 82 (S$141), or close to zero in percentage terms &ndash but it was nonetheless the first monthly decline in asking prices this year and the first drop seen in the month of June since 2017.
Average asking prices over the previous decade for this time of the year had increased by 0.6 per cent on average, the survey showed.
Compared with a year earlier, asking prices were 1.1 per cent higher Tim Bannister, director of property science at Rightmove, said this week&rsquo s inflation figures and BoE interest rates decision, which will be published on Wednesday and Thursday respectively, could spell more changes for the housing market.
&ldquo We expected some more twists and turns this year and we&rsquo ve had several in the last month, including stubbornly high inflation figures, surprisingly large average wage increases, and their eventual impact on mortgage interest rates and availability,&rdquo Bannister said.
British mortgage lenders have in recent days and weeks repeatedly repriced or pulled home loan offerings as higher consumer price inflation and wage growth spurred markets&rsquo expectations that the BoE&rsquo s interest rate-rising cycle, which began in December 2021, will continue for longer.


and the same situations going to happen in Europe

https://capital.com/france-house-price-crash-old-real-estate
https://www.dbresearch.com/PROD/RPS_EN-PROD/PROD0000000000527713/2023_Housing_market_outlook%3A_Price_dip_and_interes.PDF?undefined& realload=vbVveAu5SDYIpGSbWigO5TKJ6Yf7WkGwbFnvmeRi1r~kOfBrN8LUu3VbmQDYL2PC