As liquidity continues to pool in the US banking system, the securities portfolios of US banks have gotten larger and larger. This phenomenon coupled with the low yield environment is likely at least part of the reason that JPM was "hedging" by buying corporate credit synthetically through the sale of CDS on the investment grade credit index. Even though JPM was playing around with assets with credit risk, the percentage of securities held in government and agency bonds continues to rise. As shown below, since 2009 the percentage of Govies and Agencies in commercial bank securities portfolios has increased to 69% from 52%.
Interestingly, the banking system has started to push more of its portfolio into MBS rather than treasuries. The number of non-MBS government securities as a percentage of the securities portfolio has fallen slightly from 22% to 18% since 2010. (The Fed has only tracked this data since 2009)
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