News items related to SVB, Signature Bank failures and the US authorities' response. Read from the bottom up for the chronology:
- Goldman Sachs forecasts NO rate hike from the FOMC in March
- Crypto firm Coinbase $240bn(bn? or mn)cash balance at Signature Bank expects full recovery
- JP Morgan "continue to look for a 25bp hike at next week's" FOMC meeting
- US President Biden says bank deposit solutions avoids putting taxpayer funds at risk
- South Korean central bank eyeing jump in the won says will stabilize markets if necessary
- US President Biden to limit oil drilling in 16 million acres in Alaska & the Arctic Ocean
- "US official says banks not being bailed out" - nah, they're being bailed out, here's how
- US Treasury official says banks not being bailed out, depositors are being protected
- Federal Reserve announces emergency lending facility. Deposits to be guaranteed
- The latest on the trouble in the US banking system - more on Fed, Treasury backstop fund
- US Federal Reserve & Treasury discussing an Emergency authority to backstop bank deposits
- First Republic assures clients of continued strength of capital, liquidity, operations
- 'Risk' FX is trading higher on the chatter of a bailout &/or sale of distressed bank SVB
- Trade ideas thread - Monday, 13 March 2023
- More SVB - Federal Reserve examining steps to make funding easier as 'backstop' for banks
- Chatter is that HSBC and JP Morgan are exploring buying troubled bank SVB
- Monday morning open levels - indicative forex prices - 13 March 2023
- Bitcoin isn't waiting for the bailout announcement as it takes off in 7% rally
- Web 3.0 died last week
- US government to make 'material' announcement on Silicon Valley Bank today - report
- Yellen: SVB collapse 'clearly a concern'
- SVB collapse: What's next?
- Fed in talks to create a fund to backstop deposits if more banks fail - report
- The case for the Federal Reserve and US Treasury not to intervene in the run on the banks
- The Fed is now facing a real dilemma. Here's what will happen
Other items:
- Coming up in the Europe session - ECB speaker, BoE speaker, Eurogroup meeting
- PBOC sets USD/ CNY reference rate for today at 6.9375 (vs. estimate at 6.9380)
- Westpac forecast the RBNZ to hike its cash rate by 25bp at the April meeting
- Japan Q1 business sentiment falls even further
- New Zealand data - February Food Price Index +1.5% m/m (vs. prior +1.7%)
- New Zealand services PMI (February) 55.8 (prior 54.7)
- North Korea says it fired two 'strategic cruise missiles' from a submarine on Sunday
- Reminder, the US switched to daylight saving on Sunday. Non US people adjust your timings.
- Newsquawk week ahead preview: US inflation, ECB, China activity data
- Dow Jones technical analysis at ForexLive.com: Contrarian long oppportunity for traders?
- China finance minister &, PBOC Governor to both stay on, an unexpected continuity signal
- Chairman Jordan of the Swiss National Bank says Bank doing all it can to curb inflation
The news of impact during the session, and ahead of it over the weekend, were the woes at Silicon Valley Bank, the market expectation of some sort of Fed/US government intervention to limit systemic contagion, and the realisation of that with a new Fed fund to guarantee stricken depositors.
Currencies started trading higher against the US dollar in the very early hours with only New Zealand forex markets active. This continued as Australian forex opened. The move higher was based on expectations of some sort of rescue/bailout.
Within minutes of US futures markets opening for the new week (CME Globex opened at 2200 GMT (6pm US Eastern time on Sunday, 7am on Monday in Tokyo)) the much-awaited announcement was made. Check the links above for the details but in summary:
- All depositors of Silicon Valley Bank and Signature Bank will have access to their funds
- Shareholders and certain unsecured debtholders will not be protected
- A new Fed facility was announced with $25 billion from ESF to backstop bank deposits, the Bank Term Funding Program (BTFP)
The BTFP, in essence:
- allows banks to pledge collateral at par
- this means holdings of long-dated Treasuries or MBS with mark-to-market losses can unlock liquidity based on original value
The news reverberated through markets for the balance of the session, with further legs higher for ‘risk’ assets and FX against the USD.
There was little else of note. I will add that there was a report that US President Biden will announce that he will not permit (or will at least limit) oil drilling in 16 million acres in Alaska and the Arctic Ocean. AP had the info citing a US administration official speaking on Sunday.
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The USD (DXY index shown here) dropped on the session:
