Falling FHLB debt issuance signals the easing of the U.S. bank crisis

By Sam Boughedda

Bloomberg reported Monday that in the last week of March, the Federal Home Loan Bank system issued $37 billion in debt, a sharp fall from the $304B two weeks earlier.

Citing a person familiar with the matter, the report states that the plunge from an all-time high earlier in the month is an early sign the banking crisis has started to diminish.

The FHLBs were created to boost mortgage lending, with the system now known as the “lender of next-to-last resort.”

While Federal Home Loan Bank lending is still at highs, the falls in advances and debt issuance signal member banks’ need for cash is met or sliding. In addition, Bloomberg says it also shows that many depositors are no longer pulling cash from financial institutions.

Notes with terms from one day to one year, otherwise known as short-term issuance, are said to have fallen sharply to $32.2B and then $17.6B in the week ended March 31 after hitting a high of $153B for the week ended March 17, according to a Bloomberg source.

Furthermore, the system’s bond issuance — with durations typically over one year — has also dropped, hitting $19.8B the week ended March 31 after the system issued $151B in bonds the week after Silicon Valley Bank was put into receivership and $40.1B the week after that.