BarCap: US Treasurys holdings increase 23% in 3Q

Holdings of U.S. Treasurys increased 23.2%, or $41.1 billion, at the top 50 bank holding companies in the third quarter, according to investment bank Barclays Capital. Throughout the third quarter, there was wide speculation on whether or not the Federal Reserve would purchase long-term Treasury securities through a second round of quantitative easing. Banks and investors made their bets until November when the Fed did announce it would purchase $600 billion in Treasurys. According to Freddie Mac, QE2 has kept mortgage rates down, even pushing them to new lows last week. Whether or not the policy will result in revived economic activity remains in question. “This continues the trends of banks increasing their stock of liquid assets in response to regulatory changes,” according to BarCap. Meanwhile another economics research firm doubts the impact of QE2 will be positive. “The fact that Treasury yields have risen rather than fallen since the Fed announced the launch of QE2 is not necessarily evidence that the policy is failing, especially when the U.S. central bank has not yet even started to buy the additional bonds,” Capital Economics analysts said. “However, it does underline our concerns that additional monetary easing may not provide much help to the wider economy and could simply encourage the development of new bubbles, notably in commodities, that ultimately self-destruct.” BarCap said there was only one real large buyer in the third quarter: Citgroup (C). The bank purchased $25.7 billion in Treasurys in the quarter, raising its holdings to $64.8 billion. Of the top 50 banks, Citi now holds more Treasurys than any other. The next closest bank is Bank of America (BAC) at $50.4 billion. It purchased $2.7 billion in Treasurys during the third quarter. MetLife (MET) bought the second most Treasurys in the third quarter with $3.3 billion. After accounting for Citi, Treasurys increased only $15 billion, according to BarCap. Write to Jon Prior.