Looks like the FED has 'finally' broken a few things with all their hikes...for those arguing that they will only stop when things break, a few are breaking now..
This week : markets will deal with SVB fall outs and consequences on rates policy and other 'moral hazards' out there, initial reaction positive in Eq markets (from oversold levels), but watch out. UK Budget coming up, the market will be all over what the FED will do or not do next week, 25bps still most likely IMHO, let's see. The ECB should do 50bps still on Thursday
SVB closure & receivership is going to have a big impact on the tech ecosystem. SVB was not just a dominant player in tech but were highly integrated in some non-traditional ways
Federal Reserve Board announces it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors
Project Icebreaker, a joint initiative from the Bank for International Settlements and the central banks of Israel, Norway, and Sweden, has successfully concluded a study on the potential benefits and challenges of using retail central bank digital currencies (CBDC) in international payments
“With 311k jobs added in February after an exceptionally strong January increase, we think the Fed will continue to see the labor market as still too tight….We continue to expect a 50bp hike and policy rates reaching 5.50-5.75%:” Citi’s Hollenhorst
Gary Cohen : This is not 2008. Then every bank had a similar portfolio - mortgages - and home prices were falling. SVB has a very unique balance sheet. And unlike 2008, banks today are very highly capitalized and operate with significant regulations. The SVB matter is a classic run on a bank
Bailouts : everyone calls on every governments to bail them out, government's money comes from 'everyone' (in other words : us, taxpayers..), they keep telling us that 'no public money' has or will be used.. ..sounds like a lot of cobblers to me !
GS : "In light of recent stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its March 22 meeting with considerable uncertainty about the path beyond March."....this will be the ongoing discussion amongst ALL players.. did we see the top ? has the FED finally broken something, which is what will tell them to ease-off/stop the hiking cycle ..?..
Markets :
Fastest FED hiking cycle in decades >>> should not be too much of a surprise that most ''leveraged'' parts of the investment community gets hit first, LDI, REIT's, housing, Crypto and parts of VC world, related banks >>> we pointed out recently that JNK, HYG was perhaps (still) too richly priced lately, again not all credit are bad, home work needs to be done on individual bonds, stocks and so on!
Terminal rate from 5.7 in Sep to 5.06 in June now..curve steepener (or less inverted..) 2s10s 75bp not -110 anymore
Markets are unlikely to just settle nicely and quietly, they will be 'hunting' for the weak stories, weak balance-sheet stories, no need to be too brave at the moment, anyone who says they know exactly what will happen is not realistic about things. Many will push the contagion risk, again weakest balance-sheet, asset-liability mismatch stories will be looked at...it is not all bad! Investors will (should have done long ago) dump vulnerable names and buy quality
GOLD either way should do rather well from here (credit risk and rates topped), credit risks always bring Gold, CHF and JPY higher
Last Thursday, CEO was telling clients 'stay calm'... couldn't make this up, this is exactly what you say when you want to trigger a panic...
Lack of diversification the big issue for these kind of banks (any business for that matter)
Lordstown Motors founder cashed in before electric truck stalled | Automotive News (autonews.com) why or how can the 'system' let these things happen nowadays...
BBC will not broadcast Attenborough episode over fear of rightwing backlash | BBC | The Guardian world (UK) definitely gone mad, good grief
Love it!