Recession-shocked savers rein in rates with a US$20 tril hoard

The economic shock from the coronavirus caused companies, consumers and investors to hoard cash like almost never before.

Many experts expect that urge to save to stick around for the long haul. And that should create strong demand for the safest fixed-income products, a force that could lend a hand to the Federal Reserve when it comes to suppressing yields as the government ramps up its supply of bonds to pay for economic stimulus measures.

Deposits at US commercial banks have surged by 18% this year to a record US$15.6 trillion ($21.6 trillion), according to Fed data. The flood of cash into money-market mutual funds has subsided, but at US$4.6 trillion the total is still nearly US$1 trillion larger than before the pandemic, Investment Company Institute data show. Anthony Crescenzi, a portfolio manager at Pacific Investment Management, is among those saying that uncertainty about the economy will keep cash accounts bloated.