While a resolution to the debt ceiling gridlock would allow the U.S. Treasury to raise funds to meet its financial obligations, it could increase competition for bank deposits. Banks have been under pressure due to increased interest rates and an outflow of deposits to money-market funds. An increase in treasury bill issuance could put upward pressure on money-market and bank deposit rates. The outcome of this process and its interaction with quantitative tightening measures creates added uncertainty in the U.S. banking and lending sectors.
Debt Ceiling Resolution Could Bring Further Challenges for U.S. Banks
Published on May 26, 2023
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