The Institutional Risk Analyst

With the FOMC cutting the target for fed funds one quarter point last week, we expect to see funding costs for banks continue to fall, part of the larger narrative that has seen bank loan demand and share repurchases leaving a great deal of dry powder.  Deposits are growing 2x loans, meaning that the balance must go into securities. One of the reasons that lenders of all sorts have been pushing down loan yields is to capture assets in a market that is short quality duration.