Treasury Market Gets a Lifeline: The Bank Reallocation Strategy

The current state of the Treasury market is significantly influenced by banks’ shifting strategies amidst stagnant loan growth and moderate economic conditions. As the demand for bank loans has slowed, banks are increasingly deploying their balance sheets into activities supportive of the Treasury market, which has seen a recent improvement in liquidity despite ongoing record issuance. Let’s look into the trends affecting bank credit, the resultant liquidity in the Treasury market, and the potential future challenges faced by the Treasury market.