Banks not buying what the US government is selling

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There's at least least one good reason why Treasury yields have been drifting higher all year: Banks haven't been buying.

In fact, total U.S. government debt holdings by the 18 largest banks in the country declined by $2.6 billion in the first quarter, according to SNL Financial data that Citigroup cited in a note Tuesday titled, "The Bid for Treasuries is Over."

The decline in purchases of Treasurys mirrored a general slowing in securities growth in the quarter, with holdings increasing by just $18 billion after rising $42 billion in the fourth quarter of 2014 and $61 billion in the third quarter.

Bond yields have been volatile through the year and on a general glide higher overall. The benchmark 10-year Treasury note began the year at 2.12 percent and traded around 2.24 percent Tuesday afternoon. The 10-year's price, which moves inversely to yield, has fallen 2.26 percent in 2015.

Fixed income bears believe U.S. economic gains and a less accommodative Federal Reserve will result in significantly higher interest rates this year. However, gross domestic product has shown only halting progress so far—and in fact could see a negative number when first-quarter revisions are through—while market expectations for a Fed rate hike are pegged firmly at the latter part of the year.

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Of the biggest U.S. banks, most mildly added to their portfolios, but sharp drops from Bank of America, JPMorgan Chase and Morgan Stanley offset those gains. Wells Fargo was the biggest buyer in the quarter. (Tweet This)

Some select banks and their Treasurys holdings: