Initial crisis averted, now comes regulation
March 30, 2023
–As the first effects of the banking miscalculation wash over the financial system, there’s a sense of relief that crisis was averted. Stocks are rising and the curve is inverting further. For example, yesterday SFRM4 was -5 (9571.5), SFRM5 -1.5 (9592.0) and SFRM6 +1.0 (9694.5). The 2yr note up 1.6 to 4.078% while tens were unch’d at 3.564. SPX +1.4% and Nasdaq Comp +1.8%.
–Though SVB was apparently saddled with inept risk controls, the broader ramifications for healthier banks are 1) a still inverted curve 2) deposits which now must be compensated 3) more regulation. I googled high CD rates, and Bankrate.com showed these offers:
Marcus is offering 5.05% for 10 months
Ally is offering 5.0% for 18 months
BofA at 0.03% for 12 months
Chase is 0.01% for 12 months
So, there’s a modest spread of FIVE HUNDRED BPS between too-big-to-fail and competitors.
–Yesterday a seller of 20k SFRZ3 9800/9850cs at 4.0 (originally bought for 1.5, and mostly exited at higher levels).
–Jobless Claims today expected 195k
–PCE prices on Friday expected yoy 5.1 from 5.4% with Core 4.7 from 4.7
