To provide some evidence that bears on the theory, we look at the maturity of securities held by commercial banks. Banks fit with our conception of yield-oriented investors to the extent that they care about their reported earnings – which, given bank accounting rules for available-for-sale securities, are based on current income from securities holdings and not mark-to-market changes in value.
In line with the banks’ preference for floating-rate debt – which can be better matched to banks’ floating-rate liabilities – the share of floating-rate semis in recent years has increased. Consequently, the share of floating-rate notes in the outstanding stock of semis has increased from 2 per cent at the end of 2012 to around 10 per cent at present.