Barclays expects new inflows of deposits – credit

Barclays expects a new wave of rushing into bank deposits, at a time when “sleeping” investors are waking up to the fact that it is more profitable to invest their money in money market funds.

After the first run on deposits, which took place between the collapse of the Silicon Valley Bank (SVB) and the turmoil in the European banking sector, which strategist Joseph Abbate considers “over”, banks are about to witness a new wave, in part also from the general turmoil surrounding financial institutions.

The recent turmoil may have awakened sleepier depositors and started what we believe to be a deposit run, with withdrawals funneled “to money market funds”. It can be read in the “research” note cited by Bloomberg.

In addition, “until this week, depositors were not sufficiently aware” of the fact that the United States only guarantees the first $250,000 deposited in bank accounts. Thus, “regardless of the reasons for holding deposits at a low interest rate, we believe that depositors have just awakened to the ability to obtain more returns with less risk.”

This is because “after all, unlike banks, cash fund assets have a short maturity, being less exposed to the risk of interest rate hikes by the Federal Reserve,” Joseph Abbate justifies. In fact, one of the characteristics that distinguishes the capital market from the money market is the robustness of operations. In the second case, this is characterized by short-term operations.

“The second wave of deposit inflows has already begun and we expect banks to compete more aggressively with each other to hold deposits,” concludes the Barclays strategist.