US 10-year Treasury yield falls to 4.98% after Fed hold; bank credit tops $20tn

Long-term borrowing costs fell after the Federal Reserve held rates

The 10-year Treasury yield is a benchmark for mortgage and corporate borrowing costs. It fell to 4.98% on Oct 29, from 5.05% the day before. It is now about 33 basis points (hundredths of a percentage point) below its 5.31% close on Oct 5. The 2-year yield fell to 4.61% from 4.67%. The 30-year yield was 5.32%. The month's largest one-day move came on Oct 22. That day the 10-year yield fell 17 basis points to 4.96%, and the 2-year yield fell 16 basis points to 4.65%.

Policy rates were unchanged, but bill yields point to a December hike

The Federal Open Market Committee (FOMC) sets the Fed's interest rates. At its meeting on Wednesday it kept its target range at 3.75–4.00%. The federal funds effective rate, the overnight rate banks charge each other, stayed at 3.88%. The primary credit rate, which the Fed charges banks for short-term loans, stayed at 4.00%. The bank prime rate stayed at 7.00%. Treasury bills still yield well above the funds rate: 4.18% at 3 months, 4.28% at 6 months and 4.42% at 1 year. This fits markets expecting a rate increase in December.

Lending to nonbank lenders is growing fastest

Bank credit is the loans and securities held by all US commercial banks. In the week to Oct 21 it rose to $20.01 trillion from $19.99 trillion. Its monthly growth slowed to 3.4% annualized in September, down from 5.0% in August.

• Loans to nondepository financial institutions, which are lenders that do not take deposits, rose $13.5 billion on the week to $2.119 trillion. They grew 13.8% annualized in September.
• Commercial and industrial loans, meaning loans to businesses, rose $5.2 billion to $2.997 trillion.
• Deposits fell $31.7 billion to $19.77 trillion.

Earlier weeks were revised slightly lower

Most of the revisions were at small domestic banks. Bank credit for the week of Oct 14 is now $19.985 trillion rather than $19.995 trillion.