Dow fell 74, decliners over advancers 5-2 & NAZ inched up 1. The MLP index was off 2+ to the 231s & the REIT index rose 5+ to the 365s responding to lower yields. Junk bond funds were sold & Treasuries saw very heavy buying, taking the yield on the 10 year Treasury down 20 basis points to 3.49%. Oil dropped 2+ to the 74s & gold surged 44 to 1911, in demand by frightened investors.
AMJ (Alerian MLP Index tracking fund)
Pres Biden suggested that he will seek stronger regulations on banks after the sudden collapse of Silicon Valley Bank sent shockwaves thru the country, igniting fears of broader damage to the US financial system. But Biden did not provide any specific proposals. "During the Obama-Biden administration, we put into place tough requirements on banks, like Silicon Valley Bank and Signature Bank, including the Dodd-Frank law, to make sure the crisis we saw in 2008 would not happen again," Biden said during his brief, 5-minute speech. Congress approved a bipartisan bill in 2018 dismantling parts of those banking rules, a move regarded as a big victory for small & mid-size banks. The rollback eased regulation on some big banks, granted consumers the right to free credit freezes & provided relief to smaller banks by softening the Volcker Rule, which prohibited banks from making their own investments with customers' deposits. "I am going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely this bank failure will happen again," Biden added. Pres Biden suggested that he will seek stronger regulations on banks after the sudden collapse of Silicon Valley Bank sent shockwaves thru the country, igniting fears of broader damage to the US financial system.
Biden reacts to Silicon Valley Bank collapse, refuses to take questions
Depositors of the Silicon Valley Bank (SVB) will have access to all of
their money – following the bank's failure on Fri, at no loss to American taxpayers,
the Treasury Dept, Federal Reserve & the Federal Deposit
Insurance Corporation (FDIC) said in a joint statement yesterday. "Today we are taking decisive actions to protect the US economy
by strengthening public confidence in our banking system," the joint
statement read. "This step will ensure that the U.S. banking system
continues to perform its vital roles of protecting deposits and
providing access to credit to households and businesses in a manner that
promotes strong and sustainable economic growth." The statement said Treasury Secretary Janet Yellen had approved
actions enabling the FDIC to complete its resolution of SVB "in a manner
that fully protects depositors." Depositors will have access to
all of their money starting today. The taxpayer will bear no
losses associated with the resolution of SVB. Notably, the regulators' statement also announced the shutdown of New York-based Signature Bank. "We
are also announcing a similar systemic risk exception for Signature
Bank, New York, New York, which was closed today by its state chartering
authority," the joint statement read. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. The Federal Reserve said it would make additional funding available to
"eligible depository institutions to help assure banks have the ability
to meet the needs of all their depositors." "The U.S. banking system remains resilient and on a solid foundation, in
large part due to reforms that were made after the financial crisis
that ensured better safeguards for the banking industry," the regulators added. "Those reforms combined with today's actions demonstrate our
commitment to take the necessary steps to ensure that depositors savings
remain safe." SVB, the nation's 16th-largest bank, failed Fri after
depositors hurried to withdraw money this week amid anxiety over the
bank's health. It was the 2nd-biggest bank failure in US history
after the collapse of Washington Mutual in 2008.
Feds releases statement on future of failed SVB with billions at stake
Investors flocked to safe-haven assets such as Treasuriws & amid an extraordinary plan to backstop the banking system & limit the impact from the collapse of Silicon Valley Bank. The benchmark 10-year Treasury yield fell nearly 20 basis points to 3.50%, touching the lowest level since Feb 3 & the 10-year rate last traded around 3.54%. The yield on the 2-year Treasury tumbled more than 40 basis points to 4.16%, also the lowest in over 5 weeks. Yields move inversely to prices & one basis point equals 0.01%. Meanwhile, prices of gold hit their highest since early Feb at $1893. Gold futures gained 1.2% to $1889. Investors tend to rotate into the metal during financial shocks. What's more, lower interest rates decrease the opportunity cost of holding zero-yielding gold. Investors sought safety as banking regulators rushed to backstop depositors with money at Silicon Valley Bank & now-shattered Signature Bank, seeking to ease systemic contagion fears. Depositors at both failed institutions will have full access to their deposits as part of multiple moves that officials approved over the weekend. Concerns about the health of smaller, regional banks deepened after regulators shut down a2nd institution yesterday. First Republic Bank (FRC) led a decline in bank shares today after it said yesterday it had received additional liquidity from the Federal Reserve & JPMorgan Chase (JPM).
Investors rush into bonds, gold in flight to safety after SVB rescue
Despite all the uncertainty in the US financial system, the overall stock market is holding up reasonably well. It was encouraging to see that JPM (& undoubtedly other big financial institutions) is working with federal authories to hamdle this disaster. In the short term, investors have to keep their fingers crossed & hope for the best.Dow Jones Industrials
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