The move came the same day as Switzerland's central bank was forced to shore up the country's second biggest lender Credit Suisse by offering it $54 billion of emergency liquidity as the battered bank has been ensnared by the anxiety surrounding the U.S. bank shock.
But Credit Suisse shares resumed their decline again on Friday too, dropping over 3% first thing even as European bank stocks clawed back about 1% as Wall St futures hovered little changed following Thursday's relief rally. The VIX volatility index remained off the week's highs but stuck at 23. Fed data showed the extent of the panic over the past week and how it potentially compromises its monetary policy tightening and balance sheet reduction as it prepares to deliver what futures markets now assume will be another quarter-point rate hike next week - even if the last of the cycle.
Banks took an all-time high $152.9 billion from the Fed's traditional lender-of-last resort facility known as the discount window as of Wednesday, while also taking $11.9 billion in loans from the Fed's newly created Bank Term Lending Program. The discount window jump crashed through a prior record of $112 billion during the banking collapse of 2008. Not unlike the Bank of England's government bond market intervention last Autumn, the move bamboozles the Fed's quantitative tightening program of balance sheet reduction.
After peaking at just shy of $9 trillion last summer,
overall bond holdings had fallen to $8.39 trillion on March 8,
before moving up to nearly $8.7 trillion on Wednesday - the
highest since November.
Markets are caught in the uncertainty of what happens next.
Having pushed higher amid all the rescue attempts on
Thursday, 2-year U.S. Treasury yields clung to 4% on Friday --
still down almost a percentage point from where they were little
over a week ago. What's more, 75 basis points of Fed rate cuts
are still priced between a peak of 5% in May to yearend.
The dollar was slightly lower.
On top of all the policy head fakes and emergency moves,
China's central bank said on Friday it would cut the amount of
cash that banks must hold as reserves for the first time this
year to release liquidity and support the economy.
Key developments that may provide direction to U.S. markets
later on Friday:
* US Feb industrial and manufacturing production, capacity
utilization and leading economic index; March University of
Michigan sentiment;
* Canada Feb producer prices
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Fed opens the emergency lending taps A balance sheet setback for the Fed ECB's Composite Indicator of Systemic Stress Credit Suisse slide arrested by SNB lifeline Housing starts and building permits ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(By Mike Dolan, editing by Raissa Kasolowsky
mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)
