What Happens to 20Y+ Treasury (TLT) When Bank Lending Standards Tighten Sharply?
What happens when banks sharply tighten lending standards? Credit contraction effects, business investment decline, and recession risk.
How 20Y+ Treasury (TLT) Responds
Scenario Background
The Fed's Senior Loan Officer Opinion Survey (SLOOS) measures the net percentage of banks tightening lending standards for commercial and industrial loans. Readings above 25% indicate broad tightening across the banking system. Historical peaks above 50% have coincided with severe recessions, while sustained tightening above 25% has consistently preceded economic slowdowns.
Read full scenario analysis →Historical Context
SLOOS tightening readings exceeded 70% during 2008-2009, 45% during 2020, and 50% during 2023 post-SVB banking stress. Pre-recession tightening has been a consistent signal: 30%+ readings preceded 1990-91, 2001, 2008-09, and 2020 recessions. The 2023 reading of 50% was notable because it occurred despite no formal recession, partly offset by continued fiscal stimulus and labor market strength.
What to Watch For
- •SLOOS tightening above 40%
- •Commercial real estate loan tightening above 60%
- •Loan growth YoY turning negative
- •HY default rate rising above 5%
- •Regional bank stress indicators rising
Other Assets When Bank Lending Standards Tighten Sharply
Other Scenarios Affecting 20Y+ Treasury (TLT)
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