Depositors are pulling billions of {dollars} out of the standard banking system, based on 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 12 months.
That’s a 1.1% decline and a reversal from Q1, when US banks witnessed a $190.7 enhance in deposits.
The deposit flight comes as historic quantities of cash continues to pile into cash market funds, which have provided extremely aggressive charges in comparison with conventional financial institution financial savings accounts lately.
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 12 months, a quantity that’s surged each quarter for the reason that finish of 2022.
Cash market funds permit 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 increase rates of interest in an effort to stifle hovering inflation, considerably boosting yields in short-term Treasuries.
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