Analysts fear scale of new issuance following debt ceiling fight will push up yields and suck cash out of deposits
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A principal concern voiced by analysts was that the sheer volume of new issuance would push up yields on government debt, sucking cash out of bank deposits. That shift increases pressure on U.S. bank deposits, which have already fallen this year as the rise in interest rates and the failure of regional lenders have sent customers seeking higher-yielding alternatives.
Bank customers have already shifted heavily to money market funds that invest in corporate and sovereign debt following the bank failures this spring.
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