America’s banks have too much cash

WHEN BOND markets seized up in the spring of 2020 the problem was a shortage of cash. A global dash for dollars caused bond yields, which move inversely to prices, to spike. It sent the greenback soaring in currency markets. And it caused trading in Treasuries, usually the world’s most liquid market, almost to dry up. Today the opposite problem looms: a surfeit of money. It stems from the Federal Reserve’s response to last year’s crisis. The central bank calmed markets by buying vast quantities of bonds with newly created cash, and has continued its purchases, at a current pace of at least $120bn a month. The abundance of dollars is causing headaches for banks and investors.