Reported 11 months ago
Banks are investing more in collateralized mortgage obligations (CMOs) to mitigate the risk of losing deposits in the face of rising interest rates, with $25 billion in new CMO sales in April the highest in three years. This move is driven by banks' struggle to retain deposits due to competition from higher-yielding instruments. Through CMOs, banks can reduce risk by investing in shorter-term securities with floating rates, matching their liabilities and assets while also benefiting from attractive yields, amidst the need to prevent deposit flight.
Source: YAHOO