Depositors are pulling billions of {dollars} out of the normal banking system, in accordance with a brand new report from the Federal Deposit Insurance coverage Company (FDIC).
The company’s new quarterly banking profile says home deposits decreased $197.7 billion within the second quarter of this yr.
That’s a 1.1% decline and a reversal from Q1, when US banks witnessed a $190.7 improve in deposits.
The deposit flight comes as historic quantities of cash continues to pile into cash market funds, which have supplied extremely aggressive charges in comparison with conventional financial institution financial savings accounts in recent times.
New numbers from the Federal Reserve Financial Information (FRED) show the quantity of capital invested in cash market funds has soared to over $6.54 trillion as of June of this yr, a quantity that’s surged each quarter because the finish of 2022.
Cash market funds enable individuals simply get publicity to lower-risk and short-term debt securities together with US Treasuries.
Traders started flocking to the funds in 2022 when the Fed started to aggressively elevate rates of interest in an effort to stifle hovering inflation, considerably boosting yields in short-term Treasuries.
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