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Regional Bankers Tumbling Again

The rush out the door is on again, in particular with First Republic Bank (FRC) and PacWest Bank (PACW), but in general with all regional bankers. We saw the big bounce earlier in the week in these issues and their preferred issues and I mentioned a number of times that the ‘bounce’ was the time to lighten up if you had a need to do so. The bounce and retest of lower prices are kind of predictable, although not one I participate in – I am not a good short term trader. I know many folks here were buying the bottom of some preferreds–either for longer term investment or a quick flip. Quite obviously it will take weeks if not months to stabilize this situation.

Today we have 1st time unemployment numbers in 90 minutes–205,000 is expected after last weeks 211,000. These economic numbers are on the back burner somewhat now, but they will in the aggregate still weigh on FOMC interest rate decisions. We also have housing starts and building permits at 7:30 a.m. (central)–these are both forecast to be totally flat with last months numbers–1.31 million and 1.34 million respectively.

Yellen will be testifying before congress today–this is not a banking hearing, but I understand that she will making comments on the banking system. Obviously this could move markets, but I doubt it will be a giant market mover.

I have bought CDs again this week–from American Express Bank and Discover Bank. Yields remain strong on the 1 year issues (i.e. 5.35% non-callable) and strong on the longer dated issues, but the longer dated issues are ‘callable’ so I have stuck mainly to the 1 year issues.

Interest rates are again lower this morning with the 10 year treasury around 3.47% and the 2 year treasury is just under 4%—just around 10 days ago the 2 year treasury was over 5%—what a ride it has been.

Well let’s get another day underway and see where we go–there will continue to be market moving data coming from the banking sector–we will some bank sales in the month ahead, some of which will occur as the regulators apply pressure for sales to certain banks. Let’s go!

3 thoughts on “Regional Bankers Tumbling Again”

  1. In general all banks take in short term deposits and lend long term. That’s banking. It’s upto the regulators to keep them close. I once had an institutional investor take 6 month money and go five years. It was quite the windfall!

    No bank can withstand a run. It’s a Wonderful Life is a microcosm of banking. Doesn’t matter how much cash a bad bank has its not long for word (Potter). Doesn’t matter how much cash a good bank, it should survive. (Bailey building and loan)

    Do you know when a bank is insolvent? When the regulator says they are. A few really good banks now have their backs up to low net worth to total assets ratios. That’s our problem. We want to buy
    Heck Lincoln 9’s went below 25. Big bank float pfds mid low 20′ s

  2. With the ECB’s raise of 50 bps, wouldn’t a Fed pause risk the implication that the Fed has less confidence in US banks and the US economy than the ECB has in Europe?

    Also, since First Republic now seems to be for sale, wouldn’t the failure to complete a deal soon imply the banking industry’s lack of self confidence?

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