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Author: jsc

Inside Markets — Fed Decision

In addition to the Fed decision, markets will pay close attention to Powell’s press conference for: 1) near-term direction on efforts to contain financial contagion; 2) associated impact on financial conditions from expected tightening of bank lending standards.

Inside Markets — BTFP Facility

The debate over whether the Fed hikes by 25bp or decides to pause at tomorrow’s meeting seems less important when you consider that an estimated $440B of its BTFP facility has already been utilized.

Inside Markets — Market Volatility

Bond market volatility has spilled into equity markets and other cross markets amid low liquidity conditions. Implied equity volatility as measured by the VIX Index is pressing toward levels from last September.

Inside Markets — Pressure of Rising Funding Costs

Silicon Valley Bank’s failure highlights the pressure of rising funding costs. The Fed backstop on deposits at SIVB and SBNY reduces the likelihood of more regional bank failures, but the pressure on a banks underlying business model remains acute.

Inside Markets — Bank Examiner

Yesterday, we discussed the negative impact on bank deposits and assets from the Fed’s QT operations. The Fed’s QE program resulted in rapidly rising bank deposits and support for asset values as the central bank became the largest source of demand for bonds.

Inside Markets — Challenging Outlook

Multiple factors combine to create a challenging outlook for equities. Yesterday’s testimony from Fed Chair Powell triggered a ~1.5% sell off in the S&P 500 (SPX) and further yield curve inversion