Bridgewater Associates examines how higher deposit costs could reshape US banking, bond demand, and credit availability. It argues that weaker banks may face prolonged profitability pressure as cheap funding disappears, while reduced bank demand for duration could force private investors to absorb more government debt.
The Banking System and Credit Pipes Are Being Reshaped
Bridgewater
Larry Cofsky, Greg Jensen
Article
1 Pages
Key Takeaways
Funding Pressure Builds: A 100 basis point funding cost increase could materially weaken profitability across the 50 largest banks, representing roughly 80% of banking assets.
Deposit Repricing Risk: A few banks could become unprofitable if 10% to 20% of funding reprices, while virtually all could struggle if half reprices.
New Bond Buyers: The private sector may need to absorb nearly $2 trillion of government and government backed debt annually as Fed and bank demand retreats
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