Are We Seguing Into The Next Phase Of The Bubble Cycle?

There's been some discussions about the increasing participation of US commercial banks in the longer end of the US sovereign market.

This suggest that some of the excess reserves could now be "leaking out".

Taking a glimpse at the chart from the St. Louis Fed, I'm not sure that such "leakage" into the 10-year and 30 year treasuries has really been occurring as bank reserves remain high.

Instead the prospective seepage could likely occur elsewhere.

As seen above, there's been a recovery in commercial and industrial loans for large commercial banks, but this hasn't been true yet for all banks.


However, surprisingly, consumer loans at all commercial banks have spiked! (hat tip: Mark Perry)

And as we have repeatedly noted in this space, [e.g. see A Sweet Vindication And Validation As The Phisix Soar To A 25 Month High!], we expect the leakage to turn into a flood as global market responds to the incentives brought about by the steep yield curve.

"And as the report says, the hoarded liquidity in the US banking system is starting to find some leakage, as short term money market funds are regaining more confidence or “animal spirits” to redeploy cash into other asset markets in search of higher returns.

"And once this seepage turns into a flood, that’s where we should start to worry. But this should take more time, and possibly, based on the cyclical effect of yield curves, inflationary pressures is likely to be more apparent by the last quarter of the year."

Could this be the start of the next phase of the current bubble cycle?