TXPR closed at 545.46, down 0.75% on the day. Volume today was 1.16-million, near the median of the past 21 trading days.
CPD closed at 10.88, down 0.82% on the day. Volume was 105,510, well above the median of the past 21 trading days.
ZPR closed at 8.98, down 0.88% on the day. Volume was 161,860, below the median of the past 21 trading days.
Five-year Canada yields increased to 2.98% today.
Equities did OK today:
U.S. and Canadian stocks ended higher on Monday after a deal to rescue Credit Suisse and central bank efforts to bolster confidence in the financial system relieved investors, while participants also weighed the likelihood of a pause in rate hikes from the Federal Reserve this week.
…
All of the major S&P 500 sectors ended higher, and the Cboe Volatility index – Wall Street’s fear gauge – fell.
…
The Dow Jones Industrial Average rose 382.6 points, or 1.2%, to 32,244.58, the S&P 500 gained 34.93 points, or 0.89%, to 3,951.57 and the Nasdaq Composite added 45.03 points, or 0.39%, to 11,675.54.
…
Canada’s main stock index was helped by gains for resource and financial shares. The S&P/TSX composite index ended up 131.71 points, or 0.7%, at 19,519.43.The financial sector, which accounts for nearly 30% of the TSX, added 0.5%.
…
The two-year U.S. Treasury yield, which often moves in step with interest rate expectations, rose 7.8 basis points to 3.924% after sliding to 3.635% in Europe.The U.S. two-year yield has plunged since it peaked on March 8 at a 15-year high of 5.084% following hawkish congressional testimony by Fed Chairman Jerome Powell.
The Canadian 2-year bond yield saw a similar rise on Monday. Money markets are pricing in interest cuts at both the Fed and the Bank of Canada by this summer. The next scheduled BoC policy decision is set for April 12.
The most interesting news of the day is the demise of Credit Suisse. This has been given its own post, as the regulatory actions raise questions like ‘What does NVCC really mean?’. However, Powell and Yellen applauded:
The following statement was released by Secretary of the Treasury Janet L. Yellen and Federal Reserve Board Chair Jerome H. Powell:
“We welcome the announcements by the Swiss authorities today to support financial stability. The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient. We have been in close contact with our international counterparts to support their implementation.”
But, holy smokes, a lot of people are going to get fired:
The combination of the two businesses is expected to generate annual run-rate of cost reductions of more than USD 8 billion by 2027.
It’s beginning to look like Silicon Valley Bank really didn’t have a clue:
Silicon Valley Bank’s risky practices were on the Federal Reserve’s radar for more than a year — an awareness that proved insufficient to stop the bank’s demise.
The Fed repeatedly warned the bank that it had problems, according to a person familiar with the matter.
In 2021, a Fed review of the growing bank found serious weaknesses in how it was handling key risks. Supervisors at the Federal Reserve Bank of San Francisco, which oversaw Silicon Valley Bank, issued six citations. Those warnings, known as “matters requiring attention” and “matters requiring immediate attention,” flagged that the firm was doing a bad job of ensuring that it would have enough easy-to-tap cash on hand in the event of trouble.
But the bank did not fix its vulnerabilities. By July 2022, Silicon Valley Bank was in a full supervisory review — getting a more careful look — and was ultimately rated deficient for governance and controls. It was placed under a set of restrictions that prevented it from growing through acquisitions. Last autumn, staff members from the San Francisco Fed met with senior leaders at the firm to talk about their ability to gain access to enough cash in a crisis and possible exposure to losses as interest rates rose.
…
The picture that is emerging is one of a bank whose leaders failed to plan for a realistic future and neglected looming financial and operational problems, even as they were raised by Fed supervisors. For instance, according to a person familiar with the matter, executives at the firm were told of cybersecurity problems both by internal employees and by the Fed — but ignored the concerns.
Need to cheer up? Here’s a paper by Erica Xuewei Jiang, Gregor Matvos, Tomasz Piskorski and Amit Seru titled Monetary Tightening and U.S. Bank Fragility in 2023: Mark-to-Market Losses and Uninsured Depositor Runs?:
We analyze U.S. banks’ asset exposure to a recent rise in the interest rates with implications for financial stability. The U.S. banking system’s market value of assets is $2 trillion lower than suggested by their book value of assets accounting for loan portfolios held to maturity. Marked-to-market bank assets have declined by an average of 10% across all the banks, with the bottom 5th percentile experiencing a decline of 20%. We illustrate that uninsured leverage (i.e., Uninsured Debt/Assets) is the key to understanding whether these losses would lead to some banks in the U.S. becoming insolvent– unlike insured depositors, uninsured depositors stand to lose a part of their deposits if the bank fails, potentially giving them incentives to run. A case study of the recently failed Silicon Valley Bank (SVB) is illustrative. 10 percent of banks have larger unrecognized losses than those at SVB. Nor was SVB the worst capitalized bank, with 10 percent of banks having lower capitalization than SVB. On the other hand, SVB had a disproportional share of uninsured funding: only 1 percent of banks had higher uninsured leverage. Combined, losses and uninsured leverage provide incentives for an SVB uninsured depositor run. We compute similar incentives for the sample of all U.S. banks. Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk. If uninsured deposit withdrawals cause even small fire sales, substantially more banks are at risk. Overall, these calculations suggest that recent declines in bank asset values very significantly increased the fragility of the US banking system to uninsured depositor runs.
…
Uninsured depositors represent a significant source of funding for commercial banks, accounting for about $9 trillion dollars of their liabilities, which can make runs a significant risk for these institutions.2 In fact, during the 1980s and 1990s, nearly one-third of savings and loan institutions failed due to losses incurred from long-term fixed-rate mortgages that declined in value when interest rates surged. This resulted in a substantial reduction in the net worth of the S&L industry.
…
We provide a simple analysis of U.S. banks’ asset exposure to a recent rise in the interest rates with implications for financial stability. The U.S. banking system’s market value of assets is $2 trillion lower than suggested by their book value of assets. We show that these losses, combined with a large share of uninsured deposits at some U.S. banks can impair their stability. Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to even insured depositors, with potentially $300 billion of insured deposits at risk. If uninsured deposit withdrawals cause even small fire sales, substantially more banks are at risk. Overall, these calculations suggest that recent declines in bank asset values significantly increased the fragility of the US banking system to uninsured depositors runs (summarized in Table 1).There are several medium-run regulatory responses one can consider to an uninsured deposit crisis. One is to expand even more complex banking regulation on how banks account for mark to market losses. However, such rules and regulation, implemented by myriad of regulators with overlapping jurisdictions might not address the core issue at hand consistently (Agarwal et al. 2014).10 Alternatively, banks could face stricter capital requirement, which would bring their capital ratios closer to less regulated lenders, as documented in Jiang et al (2020). Discussions of this nature remind us of the heated debate that occurred after the 2007 financial crisis, which many might argue did not result in sufficient progress on bank capital requirements (see Admati et al. 2013, 2014 and 2018).
Frankly, I find the paper somewhat unsatisfying, using non-standard terms and using somewhat alarmist language. But it’s interesting enough!
First Republic is now in the crosshairs:
First Republic, which has drawn potential suitors like Morgan Stanley, should sell itself or raise more capital quickly, after a $30 billion cash injection by bigger banks failed to assure markets. But its management still thinks it is worth more than the market does, while buyers believe they could get it for even less.
… with more detail available:
Just one day after the biggest U.S. banks gave it a $30 billion infusion, First Republic Bank was in talks to sell a piece of itself to other banks or private equity firms, three people with knowledge of the process said, an indication that the imperiled lender is far from conquering its troubles.
The deals under discussion, which would involve selling new shares, represent a fresh level of urgency for a bank that has been under mounting pressure since last week’s collapse of Silicon Valley Bank. First Republic had been working with advisers all week, exploring possible deals, and a transaction could still result in a full sale of the company. All the while, customers have been pulling deposits and the bank’s market value shrank to $4 billion on Friday from around $22 billion at the beginning of March.
The most imperiled bank on Wall Street, First Republic, slid closer to the precipice on Monday as its shares fell 47 percent, down nearly 90 percent since its close on March 8, the day Silicon Valley Bank’s woes incited a financial panic.
The calamitous drop in First Republic’s stock price, even as shares of many of its peers steadied, highlights the fears that threaten to consume it. Until recently, the bank, based in San Francisco, boasted $176 billion in deposits and an enviable list of wealthy clientele.
…
The urgency only increased on Monday, after shares of First Republic fell so much that the New York Stock Exchange automatically halted trading 11 times to prevent a free fall. Monday’s rout also dealt a blow to the bank’s executives because, as recently as Sunday evening, senior leaders and board members were convinced that the bank had enough leeway and money from its own clients to weather further tumult, according to two people familiar with the bank’s discussions.At the very least, they assumed First Republic had weeks, not days, to solve its problems, by either raising new capital or selling itself, one person with knowledge of the matter said.
…
First Republic lost roughly $70 billion in deposits in recent weeks — nearly half of its total depositor base as of the end of last year — said two people with knowledge of the matter.
…
First Republic has also seen several downgrades of its credit in recent days. On Friday, Moody’s said it was downgrading the bank because of its increased reliance on short-term borrowing, including from the Federal Reserve and the consortium of banks. Repaying interest on loans can be expensive for a bank that is trying to shore up its cash.
…
Standard & Poor’s, in its own downgrade on Sunday, said the bank continued to face “substantial business, liquidity, funding and profitability challenges.”
But at least Signature Bank is off the books:
The Office of the Comptroller of the Currency (OCC) announced today that it has conditionally approved Flagstar Bank, N.A., Hicksville, New York, to purchase assets and assume certain liabilities of Signature Bridge Bank, N.A., New York, New York.
The transaction includes the purchase by Flagstar Bank of certain loan portfolios from Signature Bridge Bank, N.A., that total $12.9 billion and the assumption of $34 billion in deposits. The OCC imposed conditions on the approval, including to require Flagstar Bank to allocate appropriate resources to the assets and liabilities acquired, and to require a supervisory non-objection prior to paying a dividend to shareholders.
And you know what’s back? USD swap lines!
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing a coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements.
To improve the swap lines’ effectiveness in providing U.S. dollar funding, the central banks currently offering U.S. dollar operations have agreed to increase the frequency of 7-day maturity operations from weekly to daily. These daily operations will commence on Monday, March 20, 2023, and will continue at least through the end of April.
The network of swap lines among these central banks is a set of available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses.
It’s been a while since we saw those!
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -6.7194 % | 2,268.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -6.7194 % | 4,350.1 |
| Floater | 9.94 % | 9.37 % | 63,258 | 10.10 | 2 | -6.7194 % | 2,507.0 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5398 % | 3,286.7 |
| SplitShare | 5.12 % | 7.71 % | 52,178 | 2.70 | 7 | -0.5398 % | 3,925.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5398 % | 3,062.5 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.5437 % | 2,745.2 |
| Perpetual-Discount | 6.21 % | 6.35 % | 61,244 | 13.34 | 35 | 0.5437 % | 2,993.5 |
| FixedReset Disc | 5.77 % | 7.61 % | 96,767 | 12.11 | 61 | -0.6767 % | 2,130.1 |
| Insurance Straight | 6.16 % | 6.24 % | 78,208 | 13.61 | 20 | 0.1472 % | 2,915.7 |
| FloatingReset | 9.96 % | 10.34 % | 33,974 | 9.32 | 2 | 1.0884 % | 2,487.7 |
| FixedReset Prem | 6.66 % | 6.53 % | 223,855 | 12.71 | 2 | -0.5565 % | 2,321.9 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.6767 % | 2,177.4 |
| FixedReset Ins Non | 5.67 % | 7.23 % | 87,064 | 12.27 | 13 | -0.5085 % | 2,326.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BN.PR.K | Floater | -14.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 11.00 Evaluated at bid price : 11.00 Bid-YTW : 10.75 % |
| RY.PR.J | FixedReset Disc | -4.81 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 17.43 Evaluated at bid price : 17.43 Bid-YTW : 7.75 % |
| BIP.PR.B | FixedReset Disc | -3.62 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 22.20 Evaluated at bid price : 22.60 Bid-YTW : 7.91 % |
| BN.PF.I | FixedReset Disc | -3.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 8.00 % |
| BMO.PR.T | FixedReset Disc | -3.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 16.33 Evaluated at bid price : 16.33 Bid-YTW : 7.86 % |
| BMO.PR.W | FixedReset Disc | -3.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 16.44 Evaluated at bid price : 16.44 Bid-YTW : 7.78 % |
| CU.PR.I | FixedReset Disc | -2.57 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 22.77 Evaluated at bid price : 23.50 Bid-YTW : 6.73 % |
| PVS.PR.K | SplitShare | -2.57 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2029-05-31 Maturity Price : 25.00 Evaluated at bid price : 20.85 Bid-YTW : 7.97 % |
| BMO.PR.F | FixedReset Disc | -2.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 23.01 Evaluated at bid price : 23.51 Bid-YTW : 6.86 % |
| RY.PR.H | FixedReset Disc | -2.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 17.08 Evaluated at bid price : 17.08 Bid-YTW : 7.55 % |
| BIP.PR.A | FixedReset Disc | -2.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 16.56 Evaluated at bid price : 16.56 Bid-YTW : 9.26 % |
| MFC.PR.K | FixedReset Ins Non | -2.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 6.95 % |
| NA.PR.S | FixedReset Disc | -2.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 7.89 % |
| CM.PR.O | FixedReset Disc | -2.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 17.05 Evaluated at bid price : 17.05 Bid-YTW : 7.65 % |
| NA.PR.G | FixedReset Disc | -2.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 7.09 % |
| RY.PR.S | FixedReset Disc | -2.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 19.75 Evaluated at bid price : 19.75 Bid-YTW : 6.84 % |
| TD.PF.B | FixedReset Disc | -1.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 16.81 Evaluated at bid price : 16.81 Bid-YTW : 7.73 % |
| BMO.PR.Y | FixedReset Disc | -1.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 17.41 Evaluated at bid price : 17.41 Bid-YTW : 7.63 % |
| BNS.PR.I | FixedReset Disc | -1.86 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 6.86 % |
| TRP.PR.A | FixedReset Disc | -1.69 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 13.40 Evaluated at bid price : 13.40 Bid-YTW : 8.86 % |
| RY.PR.Z | FixedReset Disc | -1.63 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 16.92 Evaluated at bid price : 16.92 Bid-YTW : 7.61 % |
| TRP.PR.E | FixedReset Disc | -1.62 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 15.15 Evaluated at bid price : 15.15 Bid-YTW : 8.65 % |
| PWF.PF.A | Perpetual-Discount | -1.57 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 18.19 Evaluated at bid price : 18.19 Bid-YTW : 6.29 % |
| MFC.PR.M | FixedReset Ins Non | -1.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 7.66 % |
| CU.PR.C | FixedReset Disc | -1.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 7.03 % |
| BMO.PR.E | FixedReset Disc | -1.51 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 20.19 Evaluated at bid price : 20.19 Bid-YTW : 7.07 % |
| MIC.PR.A | Perpetual-Discount | -1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 6.79 % |
| NA.PR.E | FixedReset Disc | -1.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 6.97 % |
| CM.PR.P | FixedReset Disc | -1.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 16.53 Evaluated at bid price : 16.53 Bid-YTW : 7.75 % |
| CM.PR.S | FixedReset Disc | -1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 21.64 Evaluated at bid price : 21.64 Bid-YTW : 6.56 % |
| BN.PF.H | FixedReset Disc | -1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 21.55 Evaluated at bid price : 21.94 Bid-YTW : 7.71 % |
| TD.PF.J | FixedReset Disc | -1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 6.81 % |
| TD.PF.K | FixedReset Disc | -1.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 19.55 Evaluated at bid price : 19.55 Bid-YTW : 7.22 % |
| BN.PR.Z | FixedReset Disc | -1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 19.75 Evaluated at bid price : 19.75 Bid-YTW : 7.63 % |
| TD.PF.A | FixedReset Disc | -1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 16.59 Evaluated at bid price : 16.59 Bid-YTW : 7.74 % |
| IFC.PR.G | FixedReset Ins Non | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 19.30 Evaluated at bid price : 19.30 Bid-YTW : 7.21 % |
| PVS.PR.I | SplitShare | -1.27 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-10-31 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 7.78 % |
| TD.PF.L | FixedReset Disc | -1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 23.08 Evaluated at bid price : 23.60 Bid-YTW : 6.63 % |
| SLF.PR.D | Insurance Straight | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 6.03 % |
| TD.PF.I | FixedReset Prem | -1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 23.10 Evaluated at bid price : 24.75 Bid-YTW : 6.17 % |
| MFC.PR.F | FixedReset Ins Non | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 12.66 Evaluated at bid price : 12.66 Bid-YTW : 7.82 % |
| BN.PF.J | FixedReset Disc | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 21.87 Evaluated at bid price : 22.33 Bid-YTW : 6.88 % |
| BN.PF.A | FixedReset Disc | 1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 7.76 % |
| BN.PF.D | Perpetual-Discount | 1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 18.92 Evaluated at bid price : 18.92 Bid-YTW : 6.51 % |
| PWF.PR.L | Perpetual-Discount | 1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 20.46 Evaluated at bid price : 20.46 Bid-YTW : 6.34 % |
| POW.PR.D | Perpetual-Discount | 1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 6.32 % |
| PWF.PR.G | Perpetual-Discount | 1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 23.32 Evaluated at bid price : 23.60 Bid-YTW : 6.35 % |
| RY.PR.O | Perpetual-Discount | 1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 22.43 Evaluated at bid price : 22.70 Bid-YTW : 5.44 % |
| POW.PR.B | Perpetual-Discount | 1.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 21.44 Evaluated at bid price : 21.70 Bid-YTW : 6.28 % |
| PWF.PR.H | Perpetual-Discount | 1.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 22.66 Evaluated at bid price : 22.90 Bid-YTW : 6.38 % |
| PWF.PR.O | Perpetual-Discount | 1.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 22.88 Evaluated at bid price : 23.15 Bid-YTW : 6.36 % |
| FTS.PR.F | Perpetual-Discount | 1.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 20.32 Evaluated at bid price : 20.32 Bid-YTW : 6.10 % |
| TRP.PR.B | FixedReset Disc | 1.81 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 10.68 Evaluated at bid price : 10.68 Bid-YTW : 8.99 % |
| BN.PF.B | FixedReset Disc | 1.83 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 16.65 Evaluated at bid price : 16.65 Bid-YTW : 8.37 % |
| CM.PR.Q | FixedReset Disc | 1.99 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 17.95 Evaluated at bid price : 17.95 Bid-YTW : 7.50 % |
| FTS.PR.J | Perpetual-Discount | 2.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 6.06 % |
| SLF.PR.J | FloatingReset | 2.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 15.15 Evaluated at bid price : 15.15 Bid-YTW : 9.73 % |
| TRP.PR.C | FixedReset Disc | 2.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 11.02 Evaluated at bid price : 11.02 Bid-YTW : 9.11 % |
| RY.PR.M | FixedReset Disc | 3.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 17.22 Evaluated at bid price : 17.22 Bid-YTW : 7.53 % |
| TD.PF.C | FixedReset Disc | 4.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 16.63 Evaluated at bid price : 16.63 Bid-YTW : 7.74 % |
| TD.PF.D | FixedReset Disc | 4.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 17.99 Evaluated at bid price : 17.99 Bid-YTW : 7.55 % |
| CU.PR.F | Perpetual-Discount | 4.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 18.82 Evaluated at bid price : 18.82 Bid-YTW : 6.04 % |
| TD.PF.E | FixedReset Disc | 12.81 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 18.05 Evaluated at bid price : 18.05 Bid-YTW : 7.57 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BN.PR.K | Floater | 180,450 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 11.00 Evaluated at bid price : 11.00 Bid-YTW : 10.75 % |
| MFC.PR.I | FixedReset Ins Non | 97,900 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 22.08 Evaluated at bid price : 22.63 Bid-YTW : 6.52 % |
| BMO.PR.T | FixedReset Disc | 40,852 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 16.33 Evaluated at bid price : 16.33 Bid-YTW : 7.86 % |
| BMO.PR.W | FixedReset Disc | 26,300 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 16.44 Evaluated at bid price : 16.44 Bid-YTW : 7.78 % |
| BN.PR.R | FixedReset Disc | 26,067 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 13.46 Evaluated at bid price : 13.46 Bid-YTW : 8.93 % |
| TD.PF.E | FixedReset Disc | 25,200 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-20 Maturity Price : 18.05 Evaluated at bid price : 18.05 Bid-YTW : 7.57 % |
| There were 11 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BMO.PR.W | FixedReset Disc | Quote: 16.44 – 25.10 Spot Rate : 8.6600 Average : 4.7267 YTW SCENARIO |
| CU.PR.E | Perpetual-Discount | Quote: 19.74 – 24.12 Spot Rate : 4.3800 Average : 3.4987 YTW SCENARIO |
| BN.PR.K | Floater | Quote: 11.00 – 13.21 Spot Rate : 2.2100 Average : 1.4582 YTW SCENARIO |
| MFC.PR.M | FixedReset Ins Non | Quote: 17.00 – 20.45 Spot Rate : 3.4500 Average : 2.7051 YTW SCENARIO |
| BN.PF.G | FixedReset Disc | Quote: 15.00 – 17.00 Spot Rate : 2.0000 Average : 1.3252 YTW SCENARIO |
| IFC.PR.F | Insurance Straight | Quote: 21.14 – 22.60 Spot Rate : 1.4600 Average : 0.9533 YTW SCENARIO |
“We show that these losses, combined with a large share of uninsured deposits at some U.S. banks can impair their stability.”
There are two sides to this coin. The banks, obviously, with their responsibility to match duration risk AND the uninsured depositors, who need their means to absorb or avoid losses. Maybe it is a hassle to for the large depositors to protect against loss of millions of dollars of cash but so what? Figure it out! Maybe excess cash on balance sheets needs to taxed to fund bailouts of the morons.
I don’t understand why these uninsured depositors have so much money in bank deposits. It’s easy enough to buy T-Bills, Commercial Paper and short-term bond funds in a custodial account and just keep a few month’s expenses in the bank.
It may be that a large deposit is a quid pro quo for ‘other services’; I know that this used to be explicitly the case for many major bank clients, but – if memory serves – this became either illegal or unfashionable many years ago.
A lot of the problem is that these guys have unrealistic expectations about the safety of the cash they have squirrelled away. Remember when … what was the name of that fund … Reserve Primary! broke the buck and in the process locked up a good chunk of the world’s USD liquidity? That’s why the central banks have been so quick to bring back their USD swap line programme. I wrote about the buck-breaking – and the regulatory aftermath – quite a bit as it happened, for instance, here.
Behavioural Finance isn’t just applicable to retail investors!
It would be interesting to see what would happen if the same rules that apply to rinky-dink money market funds were to be applied to the uninsured portion of all bank deposits. I bet that would start some screaming about intrusive regulation!
John Hussman describes in detail how a decade of QE and loose money generated these excess reserves. And how when the rates have risen, it’s causing the problems that we are seeing now.
https://www.hussmanfunds.com/comment/mc230319/
A few points.
Tied selling of bank products is legal in the U.S. – most startup founders banked exclusively at Silicon Valley Bank, receiving perks such as favourable loan rates and conditions.
Many of the large deposits were from Venture Capitalists who advised their clients to use SVB.
VCs kept cash in SVB until it was invested in a startup.
When money market funds and short term government paper pay close to zero, there is little incentive to practice sound cash management.
Venture Capitalists initiated the bank run at SVB by withdrawing deposits and advising clients to do so – it was a planned demolition.
“Venture Capitalists initiated the bank run at SVB by withdrawing deposits and advising clients to do so – it was a planned demolition.”
This is an important point and I’ve wondered about it. Just how much money was made and by which parties in precipitating the run?
stusclues, I don’t think any money was made. The goal is to prevent the venture capital funds from sinking like pet rocks.
The billionaire socialist so-called venture capitalists such as Bill Ackman run venture capital funds, holding start-up zombie / ponzi companies. These companies drain cash and require annual infusions (i.e. capital raises). This model only works with interest rates near zero.
The client run on Silicon Valley Bank led to a guarantee of all depositors, combined with the takeover of SBNY may cause the FED to pause the funds rate and eventually reverse the hikes.
Market doesn’t really agree with a pause – futures indicate a 61% probability of a 25 bp increase and 31% chance of no move. Which is better than 2 weeks ago, with expectations of a 50bp raise.