NEW YORK (TheStreet) -- U.S. consumers are finally starting to take a few steps out on the risk spectrum - taking money out of liquid deposits and placing them into longer-term or higher-yielding assets.
This is a good trend for big banks, which have been able to lock consumers into low-cost funding for a longer period of time, while collecting fees from the flood of money entering the bond market.
According to a report released this week by Market Rates Insight, deposit balances at U.S. banks declined for the first time in nearly two decades. During the period ended June 30, banks held $7.67 billion in deposits, the second quarterly decline from a peak of $7.7 billion at year-end. Those deposits had been on an upward trend since the first quarter of 1992, when balances stood at a mere $3.27 billion.
The reason? Declining rates.
Checking accounts, savings accounts and money-market accounts are all yielding just fractions of a percent - from 0.1% to 0.3% -- and fell further this week, according to
As a result, after a couple years of cash-hoarding in safe, liquid products, investors are starting to demand more bang for their bucks - even if it means locking in their money for a longer period of time. Market Rates Insight data show that money flooded into long-term CDs last week, with two- and five-year deposits garnering 60% of those that repriced; the least amount of deposits that repriced went into three-month CDs. Similarly, money continued to flow into T-bills, with yield declining at a faster pace, the longer the duration.