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☆ Markets saw a dovish Fed hike but Powell's warning on credit conditions spooked investors
▼ + stars: | 2023-03-22 | by ( Patti Domm | In | ) www.cnbc.com time to read: +3 min

Are we going to celebrate the end of Fed rate hikes because things have started to hit the fan?" Strategists pointed to Powell's comment that financial conditions may have tightened more than it appears in traditional market measures, which would be stocks and bond spreads. "Number one, he remains unwavering on inflation, and he does acknowledge he sees a tightening of credit conditions. Briggs also called out Powell's comments about the impact from credit tightening , and the effect those actions can have. "That tightening via credit conditions can take the place of hikes (and vice versa if we don't get tighter credit conditions)," he said. "

☆ Premarket stocks: Five questions for the Federal Reserve as the banking crisis drags on
▼ + stars: | 2023-03-21 | by ( Nicole Goodkind | ) edition.cnn.com time to read: +9 min

A policy rate announcement is expected on Wednesday along with new economic projections, and Federal Reserve Chair Jerome Powell will face the press to answer questions. Is the Fed’s fight against inflation destabilizing the banking system? The US banking system is under a lot of pressure right now. Lagarde opted to portray that rate increase as a signal that the financial system remains strong. Yet, ironically, the banking mess is now helping tech companies and cryptocurrencies as investors flock out of the banking system in search of alternative safe spaces to store their cash.

☆ The Fed is likely to hike rates by a quarter point but it must also reassure it can contain a banking crisis
▼ + stars: | 2023-03-21 | by ( Patti Domm | In | ) www.cnbc.com time to read: +6 min

Investors will be looking for assurances from Fed Chairman Jerome Powell that the central bank can contain the banking problems. Expectations for Fed rate hikes also moved dramatically: What was expected to be a half-point hike two weeks ago is now up for debate at a quarter point or even zero. He said the Fed will not likely say it is going to pause, but its messaging could be interpreted that way. Depending on their [projections], I think the market will think this is the final hike." Swonk also expects the Fed to withhold its so-called dot plot, the chart on which it shows anonymous forecasts from Fed officials on the path for interest rates.

☆ Analysis: Market turmoil is doing central bankers' jobs for them
▼ + stars: | 2023-03-21 | by ( Yoruk Bahceli | ) www.reuters.com time to read: +5 min

European Central Bank President Christine Lagarde reckons market turmoil may do some of the ECB's tightening for it if it dampens demand and inflation. Financial conditions reflect the availability of funding in an economy, so they dictate spending, saving and investment plans of businesses and households. Central banks have been trying to tighten them by raising rates to slow rising prices. Signs of tightening financial conditions were plentiful. "Central banks no longer have a good idea about the true tightness of monetary policy," he said.

The influence of Fed rate hikes "is going to hit...That is how it is designed." As of December officials expected the policy rate would rise to around 5.1% by year's end. The experience of 1970s-era central bankers informed not only the extent of the rate increases, with the policy rate rising 4.5 percentage points from near zero as of last March. None of those reforms prevented SVB from funneling its rapidly growing deposits into long-term government bonds that lost value as the Fed raised rates. The Fed has announced a review of its supervision at SVB to see if warning signs were missed.

☆ What happens during a ‘credit crunch’ — and how you can prepare for one
▼ + stars: | 2023-03-20 | by ( Greg Iacurci | ) www.cnbc.com time to read: +5 min

But what is a credit crunch and how might you prepare? Loans would be tougher to getDuring a credit crunch, banks significantly tighten their lending standards. Banks may prioritize a healthier balance sheetA credit crunch seems likely given banking woes that have unfurled over the past two weeks. A severe credit crunch isn't a foregone conclusion, though. How to prepare for a credit crunchThere are some steps consumers can take now to prepare for a possible credit crunch.

☆ Bank troubles roil markets and make Fed's decision next week more fraught
▼ + stars: | 2023-03-17 | by ( Patti Domm | In | ) www.cnbc.com time to read: +7 min

Even with Friday's sell-off, the S & P 500 and Nasdaq scored gains for the week. The S & P 500 rose 1.4%, compared to a tiny loss of 0.2% in the Dow . "If the U.S. economy is going into a recession, they're going to be buying less cloud service. On Friday, durable goods for February is reported, and there are releases of flash S & P Global PMI data for services and manufacturing. Durable goods 9:30 a.m. St. Louis Fed President James Bullard 9:45 a.m. S & P Global Manufacturing PMI 9:45 a.m. S & P Global Services PMI

☆ Fed loans, account guarantees helped stabilize 'deposit flows' at regional banks, Treasury official says
▼ + stars: | 2023-03-17 | by ( Christina Wilkie | ) www.cnbc.com time to read: +3 min

Following the collapse of California-based Silicon Valley Bank and New York-based Signature bank last Friday and Sunday, respectively, regulators announced a series of emergency measures to stabilize the nation's banking system. "It will take time for markets to catch up with the actions that have been taken by us and by these banks," Adeyemo said on CNBC's " Squawk on the Street ." The result of the actions was a dramatic turnaround in the fortunes of numerous banks, said Adeyemo. That included banks that had anticipated potential mass withdrawals, and pledged collateral ahead of time expecting to need emergency loans. "Are all uninsured depositors in the U.S. banking system protected right now?"

☆ Banks sought record Fed liquidity in wake of SVB collapse
▼ + stars: | 2023-03-16 | by ( Michael S. Derby | ) www.reuters.com time to read: +5 min

That reverses a substantial portion of the balance sheet reduction accomplished since last summer. The bank lending facility is backstopped by $25 billion from the Treasury Department’s Exchange Stabilization Fund. Record discount window borrowing was somewhat unexpected as many analysts had thought banks would instead gravitate to the new lending facility. That said, some saw the discount window borrowing surge as a positive by itself. Reuters GraphicsBALANCE SHEET UPSWINGThe surge in emergency lending caused the Fed’s balance sheet to stop shrinking and grow notably larger.

☆ ETFs show that investors are confused about where the markets are going
▼ + stars: | 2023-03-16 | by ( Bob Pisani | ) www.cnbc.com time to read: +3 min

A common tool to gauge the market's intent is following inflows and outflows in large ETFs. There have been outflows from corporate bond ETFs like Vanguard Short-Term Corporate Bond (VCSH), high yield funds like SPDR High Yield ETF (JNK), bank loan ETFs like SPDR Senior Loan ETF (SRLN) and bank stock ETFs like Invesco KBW Bank ETF (KBWB). The Credit Suisse issue was somewhat different. Europeans at the conference were surprised that there was a focus on Credit Suisse. The common thread of the commentary was that Credit Suisse had never recovered from the financial crisis, that it had been in decline for nearly 20 years.

☆ U.S. banks' CDS prices surge as contagion concern widens
▼ + stars: | 2023-03-15 | by ( Mehnaz Yasmin | ) www.reuters.com time to read: +3 min

March 15 (Reuters) - A jump in the cost for Wall Street banks to insure bonds against default on Wednesday was another worrisome indicator of credit stress for investors amid the crisis at Credit Suisse and at U.S. regional banks. Swiss bank Credit Suisse (CSGN.S) fell to a record low on Wednesday. Five-year credit default swaps for the flagship Swiss bank hit a new record high. Credit default swaps on Credit Suisse also inverted on Wednesday with the two-year rising above the five-year, and both hit a new 52-week high, according to data from Ortex. Some analysts believe that the larger banks are resilient and are more worried about the smaller and mid-sized banks.

☆ Why the UK spring budget won't fix the economy's problems
▼ + stars: | 2023-03-15 | by ( Hanna Ziady | ) edition.cnn.com time to read: +7 min

London CNN —The last time a British finance minister unveiled a “budget for growth,” UK financial markets crashed and mortgage rates shot up, threatening to tip an already weak economy into a deep recession. But he will deliver his budget against essentially the same gloomy backdrop: the UK economy is stuck in the doldrums. John Springford, deputy director at the Centre for European Reform, estimates that Brexit had cost the UK economy 5.5% of GDP by June 2022. SVB could depress UK bank lendingAnother factor that could weigh on the UK economy in the near term: Silicon Valley Bank. “It is likely that UK financial conditions will remain tighter (or potentially significantly tighter) over coming months than they would have been without the US banking troubles,” Pickering said in a research note Monday.

☆ A recession could come sooner on cooling bank lending
▼ + stars: | 2023-03-15 | by ( Patti Domm | In | ) www.cnbc.com time to read: +1 min

In this article US2Y.VIXPACWFRCCSG.N-CH Follow your favorite stocks CREATE FREE ACCOUNTwatch nowStock Chart Icon Stock chart icon stx"Bear market bottoms are usually retested to ensure that the low is truly in. The rising risk of recession is now being exacerbated by the increased likelihood that banks will limit their lending," noted Sam Stovall, chief market strategist at CFRA. Treasury bonds, usually a more staid market, also traded dramatically. The 2-year Treasury yield was at 3.93% in afternoon trading, after it took a wild swing lower to 3.72%, well off its 4.22% close Tuesday. Stock Chart Icon Stock chart icon 2 y

☆ Goldman Sachs cuts GDP forecast because of stress on small banks, which are key to U.S. economy
▼ + stars: | 2023-03-15 | by ( Pia Singh | ) www.cnbc.com time to read: +2 min

Photo illustration, the Silicon Valley Bank logo is visible on a smartphone, with the stock market index in the background on the personal computer on March 14, 2023, in Rome, Italy. Goldman Sachs on Wednesday lowered its 2023 economic growth forecast, citing a pullback in lending from small- and medium-sized banks amid turmoil in the broader financial system. "Small and medium-sized banks play an important role in the US economy," the analysts wrote. "Any lending impact is likely to be concentrated in a subset of small and medium-sized banks." The analysts assume that small banks with a low share of FDIC-covered deposits will reduce new lending by 40% and that other small banks will reduce new lending by 15%, leading to a 2.5% drag on total bank lending.

☆ Can the Fed help fend off a banking crisis while also cooling the economy?
▼ + stars: | 2023-03-15 | by ( Alicia Wallace | ) edition.cnn.com time to read: +7 min

To stave off the latter, the Fed offered a solution that seemingly contradicted its hawkish flight path: looser purse-strings. That means the Fed can still fight the battle against inflation even while it shores up the banking sector. Although the Fed’s new program is an extraordinary action to ensure bank stability, the Fed is engaged in the lending business every day, Brusuelas noted. “The Fed buys and sells government securities each day to maintain the range of its policy rate — the federal funds rate — between 4.5% and 4.75%,” he said. Once that returns, the central bank can shift its focus back to restoring price stability, he said.

☆ This banking crisis is different from the 2008-2009 financial crisis in 4 ways, Moody's chief economist Zandi says
▼ + stars: | 2023-03-15 | by ( Huileng Tan | ) www.businessinsider.com time to read: +4 min

There are four differences between the current banking crisis and the GFC, Moody's chief economist says. Zandi's comments adds to views that the current banking crisis is different from the situation in 2008. In a series of tweets on Monday, Mark Zandi, the chief economist at Moody's Analytics, said the current banking crisis is different from the Global Financial Crisis, or GFC, in four key ways. The financial crisis, which sparked the Great Recession, was one of the worst economic downturns in US history. The economic backdrop is different this time aroundZandi also said the economic backdrop right now is very different from that of the Great Financial Crisis.

☆ Dollar little changed as U.S. inflation data poses quandary for Fed
▼ + stars: | 2023-03-14 | by ( Herbert Lash | ) www.reuters.com time to read: +3 min

The euro edged up 0.09% to $1.0739, but the dollar gained against the safe-haven yen and Swiss franc. Fed funds futures showed the market's risk adverse mood in recent days eased as bets that the Fed would stand pat at its policy meeting March 21-22 declined. The collapse of Silicon Valley Bank and Signature Bank last week suggests greater Fed scrutiny of the banking sector may be in store as credit tightens. Futures priced in perhaps two Fed rate cuts by year's end, with the terminal rate seen at 4.179% in December, down from more than 5% last week. The Japanese yen weakened 0.69% at 134.13 per dollar, while the greenback rose rose 0.15% against the Swiss franc.

Yields on Treasury bonds, meanwhile, increased as investors discounted the likelihood that the Fed would shy away from further rate increases. The Fed's preferred measure of inflation is running at almost three times the central bank's target. Important aspects of both reports, however, moved in the favor of a more tempered Fed policy. Wage growth continued to slow in February, and much of the jump in prices last month was driven by the cost of shelter, an area where Fed officials feel inflation will soon prove to be slowing. "The Fed can support liquidity in the banking system and tighten monetary policy at the same time," Sweet said.

☆ Analysis: U.S. bank loan plan provides Fed rate hike path amid SVB fallout
▼ + stars: | 2023-03-14 | by ( Gertrude Chavez-Dreyfuss | ) www.reuters.com time to read: +5 min

Banks can use eligible government securities on their books like Treasuries and agency mortgage backed-debt to guarantee the loans. By comparison, a one-year loan from a Federal Home Loan Bank, a government state enterprise that provides low-cost lending to regional banks, is around 5.4%, according to market participants. In essence, the bank lending program will allow the Fed to keep raising rates." U.S. banks had raised their holdings of government securities during periods of ultra-low interest rates to defend falling interest net margins. Major banks led by Goldman Sachs (GS.N) and Barclays Bank (BARC.L) have called for a pause from the Fed next week.

☆ As hawkish Fed pricing goes away, bullish dollar calls fade
▼ + stars: | 2023-03-13 | by ( Karen Brettell | ) www.reuters.com time to read: +4 min

The moves come as investors rush for safe havens and adjust for a less aggressive Fed in the wake of the bank failures. “The market is basically saying that the Fed is done here,” said Mazen Issa, senior FX strategist at TD Securities in New York. Some banks, including Goldman Sachs and NatWest Markets, have also said they no longer expect the Fed to raise rates this month. Traders are also pricing for the Fed to cut rates this year, with the fed funds rate expected to fall to 3.80% in December, from 4.57% now. “From a dollar perspective, that’s very important because the resetting of Fed expectations ever higher was a big part of the dollar rally we had seen before these moves,” he added.

Investors reeled in their expectations for global central bank rate hikes, and bank stocks tumbled once again. Reuters GraphicsIn the money markets, a closely watched indicator of credit risk in the U.S. banking system edged up on Monday, as did other indicators of credit risk in the euro zone. The gap between two-year euro swap rates and two-year German bond yields , widened by around 20 basis points to 83 basis points, to the highest since Nov. 11. Reuters GraphicsIn Germany, two-year bond yields dropped more than 50 basis points, much more than a drop of 37 basis points on swap rates. Back in late 2008, when failed investment bank Lehman Brothers collapsed, this swap rate went as negative as 300 bps.

The inflation rate in January actually rose, while an Atlanta Fed real-time projection as of March 8 showed gross domestic product expanding at a 2.6% annual rate, well above the economy's roughly 2% underlying potential. As of December the high point for the target federal funds rate was expected by most officials to be 5.1%. Government reports released after Powell's last press conference showed the central bank's preferred measure of inflation had risen slightly to a 5.4% annual rate. It is not the first time the Fed has been caught out by after-the-fact data updates. And Powell is trying to be nimble," said former Fed economist John Roberts.

Investors reeled in their expectations for global central bank rate hikes, and bank stocks tumbled once again. Reuters GraphicsIn the money markets, a closely watched indicator of credit risk in the U.S. banking system edged up on Monday, as did other indicators of credit risk in the euro zone. The gap between two-year euro swap rates and two-year German bond yields , widened by around 20 basis points to 83 basis points, to the highest since Nov. 11. Reuters GraphicsIn Germany, two-year bond yields were last down over 40 basis points, much more than a drop of 24 basis points on swap rates. Back in late 2008, when failed investment bank Lehman Brothers collapsed, this swap rate went as negative as 300 bps.

☆ 'Steady hand': China surprisingly retains central bank chief
▼ + stars: | 2023-03-12 | by ( Kevin Yao | ) www.reuters.com time to read: +4 min

BEIJING, March 12 (Reuters) - Yi Gang's surprise re-appointment as China's central bank governor on Sunday means a pro-market mind of high international stature will continue to represent the world's second-largest economy on the global stage. The PBOC governor has high global exposure through institutions such as the Group of 20, the International Monetary Fund, the World Bank and others. "The central bank governor is not a job that can be easily taken over by someone else. Under Yi, the central bank has cut the reserve ratio 14 times since early 2018, pumping more than 10 trillion yuan into the economy. "Yi has been a steady hand in managing policy and the appointment underlines the importance of policy stability," said a policy insider who spoke on condition anonymity.

New bank lending fell much less than expected in February from a record high the previous month. Chinese banks extended 1.81 trillion yuan ($260 billion) in new loans last month. Analysts polled by Reuters had predicted they would fall to 1.50 trillion yuan from 4.9 trillion yuan in January, and compared with 1.23 trillion yuan a year earlier. Household loans, mostly mortgages, fell to 208.1 billion yuan in February from 257.2 billion yuan in January, while corporate loans fell to 1.61 trillion yuan from 4.68 trillion yuan. TSF for the month of February fell to 3.16 trillion yuan from 5.98 trillion yuan in January, but was still well ahead of expectations for 2.20 trillion yuan.

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