US Banks Experience Largest Weekly Deposit Outflow Since SVB Crisis

Significant Drop in Total Deposits

Following substantial deposit inflows the previous week, US banks witnessed a significant decrease in total deposits for the week ending 10/09, according to the latest data. The drop, a staggering $69BN on a seasonally-adjusted basis, effectively wiped out the deposit inflows of the preceding two weeks.

Money Market Funds See Outflows

For the first time in a month, money market funds also experienced outflows, albeit small ones, totaling -$6.5BN. This took them just below record highs. It's worth noting that this is only the second weekly outflow from money market funds in the past three months, and the outflow was entirely institutional, with retail funds continuing to see inflows.

Domestic Bank Deposit Outflows

When foreign deposits are excluded, the outflows from US domestic bank deposits were significantly worse, down $85BN (NSA) and $88BN (SA). This marks the largest weekly SA domestic deposit outflow since the SVB crisis in March 2023.

Large Banks Dominate Outflows

The outflows were predominantly from large banks, with -$81BN SA and -$85BN NSA, overshadowing the small inflow for small banks, which stood at +$3.4BN SA and +$0.03BN NSA.

Fed's Bank Bailout Facility Shrinks

The Federal Reserve's bank bailout facility continued to decrease last week, dropping by $2BN and returning to immediate SVB crisis loan levels. This effectively wiped out the arbitrage-driven surge.

Loan Volumes Shrink

As expected, with the substantial drawdown in deposits, loan volumes at large banks shrank dramatically, while they rose modestly at small banks.

Gap Between Bank Reserves and US Equity Market Cap Widens

Lastly, the disparity between bank reserves at The Federal Reserve and US equity market cap continues to grow. The question remains whether this relationship will ever recouple.

Looking Ahead

All eyes will be on deposit flows next week to see if they normalize after tax day.

Bottom Line

The recent events in the US banking sector, particularly the significant deposit outflows, have raised questions and concerns. It remains to be seen how these developments will impact the financial landscape in the coming weeks. What are your thoughts on this matter? Please share this article with your friends and discuss it. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.