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The numbers: Cash-hungry banks slightly increased borrowing from the Federal Reserve for the first time in five weeks, to $143.9 billion, in a sign of lingering stress on the U.S. financial system.
A bevy of mostly mid- to small-sized banks have borrowed heavily from the Fed through an emergency program set up after the failure of Silicon Valley Bank in March. The Fed set up the program to prevent further bank runs and stabilize the U.S. financial system.
Borrowing rose by $4.4 billion in the seven days ended April 19 from $139.5 billion in the prior week, according to a Fed survey released Thursday.
Borrowing from the Fed had peaked at $164.8 billion in mid-March.
The Federal Deposit Insurance Corp. has also lent a similar amount of money to shore up the banking system.
Total bank borrowing has topped $300 billion-plus several times after SVB’s collapse, including the most recent week.
Key details: Banks borrowing from the traditional “discount” window rose to $69.9 billion from $67.6 billion in the prior week.
Bank loans from the Fed’s emergency Bank Term Funding Program totaled $74 billion, up from $71.8 billion in the prior week.
Banks can use the program to get emergency loans to pay any depositors who withdraw money, rather than potentially having to sell securities to raise cash that could cause stress in markets.
Borrowing from the FDIC, meanwhile, was frozen at $172.6 billion.
Big picture: The large amount of money being borrowed points to ongoing stress in the financial system, but the severity of the problem appears to have diminished since last month.
Banks may not be close to being in the clear, however. They hold a lot of Treasurys and other debt, analysts point out, that have lost hundreds of billions of dollars in value after interest rates rose.
Senior Fed officials say they are carefully monitoring the situation and expect banks to scale back loans to conserve their money.
Less lending could hurt the economy. Consumers and businesses rely on borrowed money to buy big-ticket items or make large investments.
What they are saying: “Banks have largely weathered the storm of the recent deposit runs. The small increase in loans out to banks is likely insignificant,” said U.S. economist Thomas Simons of Jefferies in a note to clients. “However, the banks are far from being out of the woods and many will struggle to operate profitably if they are funding themselves through these Fed facilities.”
Market reaction: The yield on the 10-year Treasury note slipped to 3.54% in Thursday trade.
