BNY Mellon CEO says the current yield level of US 10-year Treasury bonds is not unprecedented

Saeed Azhar/Arasu Kannagi Basil

Reuters, October 15 - The CEO of America’s oldest bank, BNY.N, told Reuters that the level touched this year by the benchmark 10-year U.S. Treasury yield is not without precedent. Previously, the government bond market (link) suffered a fierce sell-off, pushing yields to highs not seen in decades.

The 10-year U.S. Treasury yield, a global bellwether for borrowing costs and asset prices, saw its sharpest increase from July to September since 1994 (link).

“The 10-year Treasury yield has risen to about 5.25%. From a historical perspective, a 10-year Treasury yield at this level is not particularly unusual. You could argue that this level has actually been quite low for long periods,” BNY CEO Robin Vince told Reuters.

“People are overreacting. Although the rate hikes have come quite fast, I think this is more a sign of the yield curve returning to normal,” he said.

In the three months ending September 30, net income attributable to common shareholders at BNY jumped 20% to $1.61 billion, or $2.34 per share, mainly thanks to higher net interest income and stronger markets driving up client asset values.

During the reporting period, assets under custody and administration rose 10% year-on-year to $63.4 trillion.

This year, persistent high energy prices, combined with the AI boom supporting economic growth, have intensified concerns about inflation and rising interest rates, putting huge pressure on global bond markets.

“There is good reason to believe that, in fact, the strong performance of the U.S. economy is one of the key drivers pushing inflation and rates higher,” Vince said.

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When asked about AI-related deals and infrastructure building, Vince said he would be surprised if an oversupply situation occurred, given the current scale already built.

“Do we need the products produced by these data centers? Will there be oversupply? My view is: we need them,” Vince said.

BNY has grown to become the world’s largest custodian (link). The company sits at the core of global capital markets, not just safeguarding and managing trillions of dollars in client assets but also handling transactions and moving securities and cash among financial institutions.

Deposits Expected to Rebound in Q4

In a statement, Vince said client demand continues to grow, and BNY’s sales and project pipeline across products and regions remain very strong.

Chief Financial Officer Dermot McDonogh told Reuters he expects average deposit levels to rebound in Q4 as client activity increases.

This New York-based institution also benefits from rising rates by reinvesting cash from maturing investment securities at higher yields.

McDonogh stated that net interest income—the spread between returns on assets and the cost of liabilities—accounts for about 25% of BNY’s total revenue.

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