Marketplace · Friday, September 18, 2026
Rising Treasury yields are causing a decrease in the value of existing bonds held by banks, impacting their liquidity and lending capacity. While banks see higher yields as a safe alternative to loans, the volatility and falling portfolio values make them hesitant to significantly increase their Treasury holdings.
“When yields go up, the value of existing bonds goes down. So with bonds paying higher interest rates today, investors aren't really as excited about bonds they bought last month or last year because they're not paying today's rates, they're just not worth as much.”
“And when new bonds start paying more interest, the value of my portfolio drops. Mian says that can affect how many loans a bank is comfortable making, because if that buffer of treasuries is suddenly worth less, you're going to factor that into your appetite to lend because you know that you have less liquidity that you have available on your balance sheet.”
“When we balance those things out, does it really make sense to make a loan or is it better to put it into a treasury?”
“We might buy a little bit more right now while rates are higher, but you're just not in the business of trying to predict where interest rates are going.”