Shares of First Republic plunged 66.9%, even after the bank said Sunday it had strengthened its finances with cash from the Federal Reserve and JPMorgan Chase.
Prices for Treasurys also shot higher on both demand for something safe and expectations for an easier Fed. That in turn sent their yields lower, and the yield on the 10-year Treasury plunged to 3.46% from 3.70% late Friday. That’s a major move for the bond market. It was above 4% earlier this month.
But even that is a sharp turnaround from earlier last week, when many traders were betting on the Fed reaccelerating its hikes and increasing by 0.50 percentage points because of how stubbornly sticky high inflation has been. In a statement, BaFin stressed that the German branch does not constitute a threat to financial stability. BaFin said SVB’s German branch was responsible for lending but did not run a deposit business in the country, so deposit insurance is not an issue.
Markets in Asia ended mixed after assurances by U.S. officials that they were taking steps to protect depositors at Silicon Valley Bank, or SVB. France’s CAC 40 lost 2.2%, Germany’s DAX dropped 2.3% and Britain’s FTSE 100 dove slumped 1.9% at midday. Hong Kong’s Hang Seng jumped 2% to 19,695.97. The Shanghai Composite rose 1.2% to 3,268.70, as Chinese shares tracked earlier gains in U.S. futures that later were erased.
“With the market likely headed for a more turbulent period with U.S. inflation on a collision course with Bank ‘theater of tragedy,’ now is probably not the best time for investor euphoria,” Innes said.
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