1) 25 basis point increase................> > as expected by market
2) Rate hike nearing the end..........> > flip prata so fast? was only recently saying that rate can going higher than previously thought.
3) Confirm that credit are tightening, but to what extent is still unknown.
With this 0.25% rate hike, does that mean the Banks AFS and HTM paper losses just got inflated again?
..................................................................................................................................
Fed rate hike decision March 2023: (cnbc.com)
" &ldquo The U.S. banking system is sound and resilient,&rdquo the committee said, in its prepared statement. &ldquo Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks.&rdquo "
Luzern ( Date: 15-Mar-2023 09:27) Posted:
Moody&rsquo s cuts outlook on U.S. banking system to negative, citing &lsquo rapidly deteriorating operating environment&rsquo
PUBLISHED TUE, MAR 14 202310:41 AM EDTUPDATED AN HOUR AGO
Moody' s cuts outlook on U.S. banking system to negative, citing ' rapidly deteriorating operating environment' (cnbc.com)
- Moody&rsquo s Investors Service cut its view on the entire banking system to negative from stable.
- The big three rating firm cited a &rdquo &lsquo rapidly deteriorating operating environment&rdquo despite regulators&rsquo efforts to shore up the industry.
.....................................................................................................................................................
IMO,
A potential credit crisis is developing. Where it will be harder to get loans. Government will provide more source of Funding for Banks and Financial Institutions, but the Banks and FI will be more prudent and unwilling to loan out.
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Can' t u feel the market vibe...
whole us market maker is bonding in to gel...
whatever break or leak, 24 hr settle...
Unless Asia or Europe break first then Maybe got Show...
Now is buy buy buy...
At least till next Wednesday Fed Rate News...
Tonight , Monday small rally again...
Here macam only 1 man talking all the time. Not only banks have to htm in their books for long bonds
All central banks, insurance companies, mutual funds, countries,etc hv long bonds holdings meant for collection of dividends via semi-annual coupons.
Nothing wrong with them. SVB blew up partly it is ' not' a bank just name sake as they are specific to vc funds, tech industry and
no one can anticipate vc wants their $$$ back short term. Loss of $1B in usa is small. Small, regional banks will be eaten
up by big banks in order to be well capitlised.
IMO,
The Global Financial System is in more danger than most people think.
..................................................................................................................................
Banks And Their Shocking Paper Losses On Debt Securities Holdings | Seeking Alpha
The types of securities held by banks vary significantly. Some hold mostly U.S. treasuries and others have mostly mortgages or MBS. The length of maturities also varies between banks. Many banks hedge their debt securities, but because of the complexities of the hedges for specific banks I have not included the hedge data. Investors should, however, look into the hedges. The hedges could help offset the paper losses on the securities, but many hedges are not very liquid. SVB had significant hedge positions, but it still went under. One of the primary reasons for looking at the paper losses on securities is that in the event the bank needs to raise cash quickly these hedges may not help immediately to offset any losses by selling the securities.
Citigroup (C) loss per share ($16.02) 33% of stock price
AFS $256,608 million cost - $249,679 million fair value = $5,929 million loss
HTM $268,863 million cost - $243,648 million fair value = $25,215 million loss
*Total loss $31,144 million
JPMorgan Chase (JPM) loss per share ($16.00) 12% of stock price
AFS $216,217 million cost - $205,857 million fair value = $10,360 million loss
HTM $425,372 million cost - $388,648 million fair value = $36,724 million loss
*Total loss $47,084 million
Signature Bank (SBNY) loss per share $51.44 73% of stock price
AFS $21,071 million cost - $18,594 million fair value = $2,477 million loss
HTM $7,780 million cost - $7,018 million fair value = $762 million loss
*Total loss $3,239 million
U.S. Bancorp (USB) loss per share $12.68 31% of stock price
AFS $81,450 million cost - $72,910 million fair value = $8,540 million loss
HTM $88,740 million cost - $77,874 million fair value = $10,866 million loss
*Total loss $19,406 million
First Republic Bank (FRC) loss per share $28.15 34% of stock price
AFS $3,817 million cost - $3,347 million fair value = $470 million loss
HTM $28,359 million cost - $23,587 million fair value = $4,772 million loss
*Total loss $5,242 million
(Special note: $27,403 million of the HTM securities mature after 10 years. Longer the maturity, the more sensitive is the bond price to changes in interest rates. In addition, $16,808 million of that number are tax-exempt municipal bonds that mature after 10 years. Munis are also often much less liquid than UST securities.)
Wells Fargo (WFC) loss per share $13.09 32% of stock price
AFS $121,725 million cost - $113,594 million fair value = $8,131 million loss
HTM $297,059 million cost - $255,521 million fair value = $41,538 million loss
*Total loss $49,669 million
Western Alliance Bancorp (WAL) loss per share $9.61 19% of stock price
AFS $7,973 million cost - $7,092 million fair value = $881 million loss
HTM $1,284 million cost - $1,112 million fair value =$172 million loss
*Total loss $1,053 million
Bank of America (BAC) loss per share $14.28 47% of stock price
AFS $225,485 million cost - $220,788 million fair value = $5,697 million loss
HTM $632,863 million cost - $524,267 million fair value = $108,596 million loss
*Total Loss $114,293 million
PacWest Bancorp (PACW) loss per share $8.25 67% of stock price
AFS $5,655 million cost - $4,843 million fair value = $812 million loss
HTM $2,271 million cost - $2,110 million fair value = $161 million loss
*Total loss $973 million
These Banks failures or banks getting into trouble are punching holes in the Global Financial Web.
Moody&rsquo s cuts outlook on U.S. banking system to negative, citing &lsquo rapidly deteriorating operating environment&rsquo
PUBLISHED TUE, MAR 14 202310:41 AM EDTUPDATED AN HOUR AGO
Moody' s cuts outlook on U.S. banking system to negative, citing ' rapidly deteriorating operating environment' (cnbc.com)
- Moody&rsquo s Investors Service cut its view on the entire banking system to negative from stable.
- The big three rating firm cited a &rdquo &lsquo rapidly deteriorating operating environment&rdquo despite regulators&rsquo efforts to shore up the industry.
.....................................................................................................................................................
IMO,
A potential credit crisis is developing. Where it will be harder to get loans. Government will provide more source of Funding for Banks and Financial Institutions, but the Banks and FI will be more prudent and unwilling to loan out.
IMO,
Fed is still going to hike rate next week, either 25 or 50 basis point, prior to the banks collapsed, 50 basis is the likely hike, now it seems that Fed might just hike 25 points, just to be prudent in not stressing the banks further.
But.... if we look at the responsibilities of the Fed and consider the question.......has significant jobs been lost?......has inflation comes down? Is saving the banks the job of Fed? Are steps being taken by Yellen and FDIC?
Now if Fed decides to disregard the economic numbers and not hike rate or only hike rate by 25 points, what kind of signal is the Fed sending out? How would the market react, how will the companies react and how will the consumer react? How will thsi affect inflation and employment?
History is potentially going to reapeat here.
Luzern ( Date: 07-Mar-2023 09:19) Posted:
The Fed, has a dual mandate to promote maximum employment and price stability. In pursuit of these goals, the Fed has several tools at its disposal to address high inflation. Here are some of the ways the Fed may approach high inflation now:
- Monetary policy: The Fed can use monetary policy to control inflation by adjusting short-term interest rates. In response to high inflation, the Fed may increase interest rates to reduce the growth of money supply and dampen demand for goods and services. This could help to slow down price increases and bring inflation under control.
- Communication: The Fed can use its public statements and press conferences to communicate its intentions and influence expectations of inflation. By clearly communicating its commitment to price stability, the Fed may be able to anchor inflation expectations and prevent them from becoming unmoored.
- Tools beyond interest rates: The Fed has other tools beyond interest rates that it can use to influence the economy, such as open market operations, forward guidance, and quantitative easing. These tools could be used to address high inflation if interest rates alone are not effective.
- Fiscal policy coordination: The Fed may coordinate with fiscal policymakers to address high inflation. For example, fiscal policies that reduce demand and lower inflationary pressures, such as tax increases or spending cuts, could be used in conjunction with the Fed' s monetary policies.
- International coordination: The Fed may work with other central banks around the world to coordinate their monetary policies and stabilize exchange rates. This could help to reduce inflationary pressures and promote price stability in the global economy.
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Need to re-asses the investment for SReits with US exposure, especially in the Tech and Data sectors.
New York regulators close Signature Bank, second US bank failure in days after SVB collapse - CNA (channelnewsasia.com)
Signature Bank reported deposit balances totalling US$89.17 billion as of Mar 8. As of Dec 31, it had about US$110.36 billion in assets, according to New York state' s Department of Financial Services.
Banks including JPMorgan, Charles Schwab, see $52bn rout on SVB&rsquo s deposit losses - Financial News (fnlondon.com)
The Federal Deposit Insurance Corporation in February reported that US banks&rsquo unrealised losses on available-for-sale and held-to-maturity securities totalled $620bn as of 31 December, up from $8bn a year earlier before the Fed&rsquo s rate push began.
SVB, based in California, caters to tech, venture-capital and private-equity firms and grew rapidly along with those industries. Total deposits rose 86% in 2021 to $189bn and peaked at $198bn a quarter later.
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