Daily Market Color

Equities Mixed as Banks Lose Capital Relief

Swap rates and Treasury yields continue their climb
The S&P and DJIA both ended the week in the red with bank stocks leading the indices lower, while the Nasdaq recouped some of its previous day losses. Earlier in the day, the Fed announced it would allow a key capital break for large banks to expire at the end of March leading financial stocks lower. The announcement also pushed Treasury yields and swap rates 3-5 basis points higher across the curve- the 10-year yield closing at 1.72%.  
Fed ends COVID-19 capital relief for large banks
Early in the pandemic, the Fed provided capital relief to the largest U.S. banks in removing capital requirements for Treasurys and reserves. On Friday, the Fed announced it would allow the relief to expire at the end of the month. In preparation for the relief to expire, large dealer banks have been trimming their Treasury holdings, which has added fuel to the fire on the recent Treasury sell-off.
CRE loan growth remains subdued
In the most recent Fed H8 data release, bank CRE portfolios continue to struggle in 2021. Both large and small banks saw WoW contraction in CRE, decreasing 0.16% and 0.09%, respectively. Deposit growth picked up again this week as new stimulus checks hit bank balance sheets.

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