To use a Ukraine war analogy, if Silicon Valley Bank is Soledar, then First Republic Bank is Bahkmut.
First Republic is in a similar line of business to Silicon Valley Bank and -- as you can see -- its shares have also plunged.
But there's been an intraday turnaround today in FRC of +80% in a sign that it could be sold or that it's not facing the same kind of problems.
The issue is that a bank run can accelerate at any time. If you were a company with millions in First Republic, would you leave your money in it?
If First Regional suffers the same fate that Silicon Valley faces then there's the possibility of real contagion. Now the market has already sensed that but after an early rout, the regional US bank ETF has trimmed losses to 3.4%.
That's not a pretty chart and it's the worst week in 15 years.
The good news is that the Fed put is showing itself. If not for a 40 bps shift lower in Fed funds futures pricing, the market would be in much worse shape right now.
One of the relief valves for that though is the US dollar and the market is now pricing in a lower terminal rate and that makes dollar holdings less attractive.
In any case, like the Ukraine war, this could swing either way right now. That's why people are watching First Regional like they're watching Bahkmut.
