One possible reason for the shift may have been an expectation of renewed Treasury purchases as part of a new round of quantitative easing. It may also be an adjustment to new capital adequacy requirements. The higher requirements under Basel III can make holding Treasury bonds, against which banks do not have to set aside any capital, financially sensible even at record low yields. (See: How Does the Yield Curve Work?)
But that's really just speculating. Banks do what banks do. And what they've done is start piling up Treasury and Agency bonds again.
- by CNBC.com senior editor John Carney
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