No hint of credit tightening in Fed survey of bankers

WASHINGTON Mon Aug 5, 2013 2:03pm EDT

The sun rises to the east of the U.S. Federal Reserve building in Washington, July 31, 2013. REUTERS/Jonathan Ernst

The sun rises to the east of the U.S. Federal Reserve building in Washington, July 31, 2013.

Credit: Reuters/Jonathan Ernst

WASHINGTON (Reuters) - U.S. financial conditions remained favorable during the second quarter despite the spike in market interest rates, according to the latest Federal Reserve survey of bank senior loan officers.

Banks eased lending conditions for commercial and industrial loans, and demand for consumer lending strengthened across the board, including the housing sector.

A jump in mortgage rates, a reaction in part to warnings from Fed officials that they may soon begin curtailing the pace of their bond-buying stimulus, has sparked concern that a nascent housing recovery might peter out.

Ten-year Treasury note yields, a benchmark for borrowing costs across the American economy, are now hovering around 2.65 percent, up a full percentage point in just three months.

There were no signs in the Fed's report on Monday, however, that the higher yields were having a palpable adverse affect on bank loans.

"Domestic banks, on balance, reported having eased their lending standards and having experienced stronger demand in most loan categories over the past three months," the report said.

In addition, about half of respondents reported stronger demand for commercial real estate lending.

Still, some large banks reported weaker demand for commercial and industrial loans.

The Fed continues to buy $85 billion in Treasury and mortgage securities per month in an effort to bolster a weak recovery, though it is widely expected to begin paring back such purchases later this year. U.S. gross domestic product grew 1.7 percent in the second quarter.

(Reporting by Pedro DaCosta; Editing by Leslie Adler)

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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