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5 Things We Watch: Five Aspects Surrounding the Banking Turmoil

This week really has been one for the books. On Friday, markets sounded the alarm as we experienced the second largest bank-failure in US history. Naturally, this behemoth event swept magazine covers and blew up our phones and inboxes leaving not much room for other things to watch - hence this peculiar edition of the recurring ‘5 Things We Watch’, where all five things relate to the banking frenzy.
2023-03-15

What a bad day to be out-of-office and seeing clients in Madrid, but I hope that we managed to cover the developments well enough for you to get a feeling of how serious this might be.

In any case, welcome to this week’s edition of the ‘5 Things We watch’. An edition imprinted by the recent banking turmoil. On Friday, Silicon Valley Bank – the then 16th largest bank in the US – came to feel the ramifications of hazardous (if even existing) risk management paired with rising interest rates, as the combination of the two led to depositors running for the door. But in fact, that’s barely scratching the surface.

We have covered Credit Suisse extensively throughout the day on our live-blog and our best assessment is that Credit Suisse will be forced into a deal before the weekend. Truly historic times and we have only a few positions left on our books after being stopped out on some of our riskier positions.

Long JPY, short NZD,  2s10s curve steepeners (or just outright buying bonds) remain and I am pondering whether to close ALL equity European equity risk on our books. We prefer US equity risk to European equity risk without a doubt as of now. 

We close our long Copper, our long HUF consequently.

Whilst tuning out the noise, we’ll uncover the following five subjects related to the ongoing affair     

  1. Deposit flights began ahead of SVB’s troubles
  2. HTM portfolios are underwater – but how about Fed’s discount window?
  3. Keep a lookout for high CRE exposure paired with slim bond holdings 
  4. Stern EU legislation and regulation may prevent a US-like unfolding – a comparison
  5. The ECB and Fed reaction function and the market-pricing

Find out everything about the above five topics as a basic member of Steno Research.

This week really has been one for the books. On Friday, markets sounded the alarm as we experienced the second largest bank-failure in US history. Naturally, this behemoth event swept magazine covers and blew up our phones and inboxes leaving not much room for other things to watch - hence this peculiar edition of the recurring ‘5 Things We Watch’, where all five things relate to the banking frenzy.
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