Banks Offload Bonds at a Loss, Betting on Future Fed Rate Reductions

U.S. regional banks are increasingly selling underwater bonds at a loss to prepare for anticipated interest rate cuts by the Federal Reserve.

Unlike the panic induced by Silicon Valley Bank’s similar actions last year, these banks are reinvesting the proceeds into higher-yielding securities to benefit from future lower rates.

This strategic move, undertaken by banks like PNC Financial Services and Truist, aims to enhance long-term net interest income despite short-term losses.