Month: April 2018

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US consumer and commercial debt hit record highs but charge-off and delinquency rates remain at low levels

Here is the debt outstanding for all commercial banks in the US (all data as of March 31, 2018),

Total consumer credit including student loans $3.9 trillion (up from $2.6 trillion in 2008)
Total commercial and industrial loans $2.15 trillion (up from $1.5 trillion in 2008)
Commercial real estate loans $2.1 trillion (up from $1.6 trillion in 2008)
Mortgage Backed Securities $1.76 trillion (up from $800 billion in 2009)
Student loans $1.5 trillion (up from $500 billion in 2008)
Consumer credit cards and other revolving credit $775 billion (up from $400 billion in 2008)
Mortgage debt $1.32 trillion (down from $1.42 trillion in 2008)

Total Consumer Credit Outstanding:

US Total Consumer Outstanding, All Commercial Banks
Source: Board of Governors of the Federal Reserve System (US)

Continue reading “US consumer and commercial debt hit record highs but charge-off and delinquency rates remain at low levels”

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ECB asks Deutsche Bank to estimate the cost of winding down its investment bank; Spain’s sovereign debt upgrade; Canadian bond yields rising most amongst the G20

The European Central Bank (ECB) has asked Deutsche Bank to estimate the costs of winding down its trading operations. Apparently Deutsche Bank is the first bank that has been asked to run this exercise, but others may follow.

How complex is Deutsche Bank? Continue reading “ECB asks Deutsche Bank to estimate the cost of winding down its investment bank; Spain’s sovereign debt upgrade; Canadian bond yields rising most amongst the G20”

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Here’s how banks in the US earned over $25 billion in 2017 by lending money to the Federal Reserve and why that number could double in 2018

Banks in the US can hold excess reserves with the Federal Reserve. In 2008, as part of the Emergency Economic Stabilization Act of 2008 it was mandated that interest would be paid on reserve balances held with the Federal Reserve. What is of significance is the interest rate on excess reserves.

Since 2015, the Federal Reserve has set the interest rate on excess reserves equal to the top of the target range for the federal funds rate. Why is this important? Look at the graphs below.

Excess Reserves of Depository Institutions
Excess Reserves of Depository Institutions; Source: Board of Governors of the Federal Reserve System (US)

Continue reading “Here’s how banks in the US earned over $25 billion in 2017 by lending money to the Federal Reserve and why that number could double in 2018”

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Weekly overview: Oil prices hit 3-year high; US 2-year Treasury yields highest since September 2008; Subprime is making a comeback

Oil prices closed at $67.39 on Friday, gaining 8.6% during the week and hitting a 3-year high. Like we covered here, the impact of oil prices is being felt with oil dependent companies like airlines already seeing margins squeezed.

Meanwhile, US 2-year Treasury bonds hit a high of 2.373%, the highest since September 9, 2008 (if the date sounds familiar it was just 5 days before Lehman Brothers entered Chapter 11 administration). Continue reading “Weekly overview: Oil prices hit 3-year high; US 2-year Treasury yields highest since September 2008; Subprime is making a comeback”

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Crude oil is up 23% over the past year and it has started making an impact; US 3-year bond yields at a 11-year high

Crude oil at $65.5 a barrel is up 23% over the past year and Brent is up some 27% during the same period. Gasoline prices are up 16% over the past year and we aren’t yet in the US driving season (which pushes up the price and begins in July). Continue reading “Crude oil is up 23% over the past year and it has started making an impact; US 3-year bond yields at a 11-year high”

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Apparently, there are days when no one trades some Japanese government bonds; Could China devalue their currency or sell US Treasurys?

Some 80% of 10-year Japanese government bonds are held by the Bank of Japan. And apparently there are days when no one trades those 10-year bonds because there is no point of trading it. Why? Well, because the Bank of Japan has a policy to control yield curves and since they hold majority of it there are hardly any price movements.

But is also claimed that there are days when the 2-year bonds aren’t traded. That is interesting because the Bank of Japan only holds a small proportion of 2-year bonds. How to traders keep their jobs then? They trade bond futures instead. Continue reading “Apparently, there are days when no one trades some Japanese government bonds; Could China devalue their currency or sell US Treasurys?”

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The European banking crisis is far from over

Hidden away in the European Central Bank’s supervisory and prudential statistics are metrics for asset quality. It isn’t easy to find and if you do find them then the spreadsheets won’t open without issues. Once If you manage to get them to work you will find some quite stunning statistics.

Here are the numbers and graphs for asset quality as of September 30, 2017 (the latest set of data available), Continue reading “The European banking crisis is far from over”