While investors holding bonds to maturity can absorb bond price hits, as 'safe' bonds like Treasuries will pay back at par eventually, banks and leveraged investors required to mark holdings to current market prices may have to register the hit - with unnerving consequences. SVB may be an unusual case in point - given its exposure to both last year's attrition in the tech sector, related startups and bond markets. But it's unlikely to be alone.
Shares of First Republic , a San Francisco-based
bank, sank more than 16.5%. Zion Bancorp dropped more
than 12% and the SPDR S&P regional banking ETF slid 8%.
Major U.S. banks were also hit, with Wells Fargo down 6%, JPMorgan down 5.4%, Bank of America 6%
lower and Citigroup 4% lower.
With added pressure from mounting concerns about Credit
Suisse - after it postponed publication of its annual
report this week following a last-minute call from the U.S.
Securities and Exchange Commission - European bank stocks
followed U.S. peers lower. Credit Suisse stock itself was down
another 4% on Friday to record lows.
In a troubling week for banks and financial tech generally,
there was also trepidation about the failure of crypto lender
Silvergate Capital , which disclosed plans to wind down
and voluntarily liquidate. British subprime lender Amigo said on Friday it was struggling to secure an
additional 45 million pounds ($54 million) of capital from
investors - sending its shares down 30%.
The reverberations around world markets more generally saw a
retreat from risk and dash for safety - not least on a critical
day for assessing Fed rate risk given the release of the
February employment report later.
Ironically, the dash for safety prompted a rally in bonds -
in part because some think signs of financial stress may force
the Fed to think again about speeding up rate hikes later this
month.
Ten-year Treasury yields have recoiled almost 20 basis
points from yesterday's highs to just above 3.8% on Friday and
futures pricing for peak and yearend Fed policy rates dialled
back. The moves were encouraged ahead of the monthly jobs report
as weekly unemployment stats on Thursday showed some tentative
loosening of the U.S. labor market at last.
As Wall St stock indices retreated sharply, the VIX index of implied equity volatility staged its biggest one-day jump since June last year and world stock indices hit their lowest level in two months. U.S. stock futures were in the red again ahead of the open. In currency markets, the dollar held steady amid the stress - slightly lower against sterling and the euro, but up against the yen after the Bank of Japan held the line on Friday in its lonely easy monetary policy stance. The BOJ held off making changes to its controversial bond yield cap policy, leaving all options open ahead of a leadership transition in April. Key developments that may provide direction to U.S. markets later on Friday: * U.S. February employment report * European Commission President Ursula von der Leyen discusses clean energy and supply chains with U.S. President Joe Biden in Washington * European Central Bank President Christine Lagarde meets German Chancellor Olaf Scholz in Berlin <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ SVB Financial's stock slumps as investors fear bank run SVB cracks as bond blows bruise banks U.S. jobs market The BOJ’s YCC faces a reckoning ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (By Mike Dolan, editing by Christina Fincher mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)
Messaging: mike.dolan.reuters.com@thomsonreuters.net))