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Banking stocks fell again on Friday, with shares in German giant Deutsche Bank knocked by worries that regulators and central banks have not yet contained the worst shock to the sector since the 2008 global financial crisis.
Mar 24, 2023 - 12:25:44 PDT
Property owners were already under pressure from rising rates and empty office space. The last thing they needed was a banking crisis.
Bond traders abandoned wagers that the Federal Reserve will raise interest rates in May and added to bets that its next shift will be a rate cut as early as June as the US approaches a recession.
Goodness knows why it took soo long, but deposits are finally flowing into money market funds en masse, as the following chart from the always-interesting Andreas Steno Larsen highlights.
Along those same lines, the following chart from Bank of America via Isabelnet, shows the increasing expectation among fund managers that the yield curve will steepen from here on out.
Controlling money is a way to make sure you control the human beings using your money.
Market commentators tend to focus on Bulls and Bears and Federal Reserve policies as drivers of stock market gyrations, but there's a far more profound dynamic working beneath these veneers: the forces of adaptation and evolution transforming the economy and society as conditions change.
Mar 24, 2023 - 11:25:14 PDT
I created the above chart in Excel by creating a weighted average of CME FedWatch interest rates expectations on those select dates.
Gold prices were on track to end a volatile week higher on Friday as bank contagion fears bolstered both safe-haven demand and bets on a pause in Federal Reserve rate hikes, adding to the appeal of zero-yield bullion.
Mar 24, 2023 - 11:22:28 PDT
Shares in Deutsche Bank, Germany's largest lender, have fallen sharply and dragged down major European banks as fears about the global financial system send fresh shudders through the market.
The question is whether this return of QE will continue or whether it is a one-off. The Fed meets next week so we can expect lots of volatility as the markets grapple with this potential U-turn in policy.
Mar 24, 2023 - 08:43:32 PDT
So the choice for central bankers throughout the developed world is either to allow free markets to operate, or to embrace socialism. It’s a choice between a sudden-onset collapse and an unmanageable crisis, or “printing” all the currency needed to paper over the gaping financial holes in the system and having a amore gradual and more manageable unravelling. I think no central bank in the world will opt for the free market capitalism at this point.
The senior senator of Utah is in the van of burgeoning Congressional scrutiny of the Fed itself as the root of today’s economic crises.
This system of crisis-prone, hyper-financialized capitalism seems ever more like a junkie. If it doesn’t get its regular fix of public sector help, it will simply collapse and die.
Mar 24, 2023 - 08:12:18 PDT
It has been a wild few days for banks. The collapse of Silicon Valley Bank happened this month, but it feels like years ago. It was only on Sunday that the regulator-brokered deal between UBS and Credit Suisse was signed. Since then, stock prices have swung all over the place. We’ve seen interest-rate increases, fears about contagion, and mixed messages about what other help banks might get.
Liquidity in the office sector is drying up. The latest banking crisis will only make it worse. Approximately $17 billion in office-backed Commercial MBS (CMBS) is due for refinancing in 2023.
Yellen Convenes Emergency Financial Stability Meeting On Friday As Banking Crisis ExplodesMar 24, 2023 - 07:10:15 PDT
Bloomberg just reported that Treasury Secretary Janet Yellen - who was singlehandedly responsible for stoking and restarting the bank crisis on Wednesday which until that day was easing back, with her comments that nobody in charge was even talking about a uniform deposit insurance, let alone working on one - will convene the heads of top US financial regulators Friday morning for a previously unscheduled meeting of the Financial Stability Oversight Council.
So neither the market nor the Fed has really panicked yet. But they both will, in my opinion. On Friday, Deutsche Bank shares are down about 10% and swaps on the firm are spiking. So where do markets go from here?
Mar 24, 2023 - 07:07:58 PDT
The Federal Reserve never died. In fact, The Fed is growing its balance sheet again. Why? A slowing economy and weakness in the banking sector (thanks to inflation and the Fed trying to get inflation back to 2%.
Of course, all this 'good' news hit before the current 'credit-tightening' crisis occurred.