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Monday Morning Kickoff

Well here we go–the FOMC meeting is on deck starting tomorrow culminating with an interest rate decision to be announced Wednesday at 1 p.m. central. A presser to follow at 1:30.

Over the weekend we have Credit Suisse (CS) being bought by UBS for $3.2 billion. Of course the Swiss National Bank stepped in with a $108 billion backstop. This now will be a bank with $5 trillion in assets. It is also believed that Silicon Valley Bank (SVB) is near a sale while it appears that Signature Bank will be bought by New York Community Bank (NYCB).

Last week we had the S&P500 close 55 points higher than the previous Friday–1.4% higher. The low on the week was 3808 and the high was 3964–a range of around 4% on the week seems pretty tame all things considered.

Interest rates tumbled hard with the 10 year treasury closing out the week at 3.4% which is about 30 basis points below the close from the previous Friday. The 2 year treasury yield closed the week at 3.83% which was around 77 basis points below the close the previous Friday.

For the coming week, as usual, we have plenty of economic news, but mainly it is about the FOMC interest rate decision and further developments in the banking situation.

The Federal Reserve balance sheet shot higher by almost $300 billion last week as the Fed moved to loaning money on bank balance sheet assets. Obviously the banking issues have totally distorted the move by the Fed to use quantitative tightening (QT).

The average $25/share preferred stock and baby bond took a hard knock last week falling by 72 cents. Investment grade issues fell 43 cents, banking issues fell by 70 cents, mREITs by 87 cents. At an average of $20.65 we are .the lowest prices since 11/4/2022.

11 thoughts on “Monday Morning Kickoff”

  1. I see where CS’s coco bonds are getting wiped out. Is anyone looking at any of the other types of bonds that CS has issued?

    1. Thanks Citadel – yes this is a useful site and I used it on the weekend looking at smaller banks to see how much of their portfolio took major hits–and the answer is big hits.

      1. Tim (or anyone), would credit unions’ insurance (ncua.gov) be comparable to FDIC in terms of safety?

        1. My understanding is that NCUA only insures deposits at FEDERAL credit unions. I am a member of a credit union which insures deposits with American Share Insurance, “a credit union-owned share insurance fund protecting credit unions and their members for nearly 50 years,” according to their website. You should check your credit union’s website for similar information.

        2. Credit union failures tend to be much smaller because they don’t target BIG corporate depositors who exceed insurance limits, so “runs” tend not to happen. They do fail, but usually in a much more orderly way. IMHO, credit unions are still going through a consolidation. It used to be that every major employer helped set up a CU for its employees. Now those CUs are having to either grow to serve a bigger audience, merge with another CU, or go out of business.

          NCUA is a federal entity (created by Congress) to regulate credit unions. Like the Federal Deposit Insurance Corp., which insures bank deposits, the NCUA insures federally chartered credit union deposits. Some state chartered institutions choose to be under NCUA, while others choose to go with private insurance. Personally, I only use federally chartered CUs just so I have one less thing to worry about.

          “Credit union members have never lost a penny of insured savings at a federally insured credit union.”
          (from NCUA website)

          List of failed credit unions in the last 10 years

          For comparison, list of failed FDIC covered banks

          1. Many thanks Private. That helps a lot. I appreciate you taking the time and providing that insightful information. Best regards

  2. Then we still have the upcoming fight in Washington over raising the debt ceiling in the coming months. The suspense is like watching the seconds tick off waiting for the bell to ring it’s time to go home.

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