Part 5/11:
As depositors transfer their funds to short-term U.S. Treasuries and Treasury money market funds—both perceived as safer assets due to higher yields—many regional banks will see their deposit bases shrink rapidly. This “flight to safety” could undermine the liquidity of banks that serve local communities and small businesses, potentially causing a wave of failures among nascent and innovative companies. Given the high-yield environment for Treasuries, this movement could also distort the broader bond market, driving yields lower and complicating Federal Reserve policies aimed at controlling inflation through interest rate hikes.