Deposits Surge at U.S. Banks Helped by Fed Actions; Cash Largely Sitting on the Sidelines

DBRS, Inc. (DBRS Morningstar) published a commentary highlighting the continued strong deposit growth at U.S. banks. Most banks are primarily purchasing short duration high quality liquid assets (HQLA), leaving large balances parked at the Federal Reserve (Fed), or both. As a result, this growth is adding to the significant net interest margin pressure seen at banks following the Fed cutting rates to zero. Overall, we view the outsized deposit growth as enhancing on-balance sheet liquidity.