Daily Market Color

Banking Fears Spur Yet Another Volatile Session

Extreme market volatility continues amid further banking fears. Treasurys rallied significantly today as fears of instability in the banking sector continued, with Credit Suisse today’s headliner. A weaker than expected PPI also contributed to the Treasury rally, which came in at -0.1% after forecasts called for a MoM level of 0.3%. The 2-year yield declined as many as 54bps in the early-goings of the session, which was partially offset by the Swiss National Bank’s assurance that Credit Suisse would receive a liquidity backstop if needed. The 2-year yield still ended the session down over 36bps, now sitting at 3.89% after peaking above 5.06% last Thursday.

Credit Suisse shares tumble on Saudi National Bank news. This morning, the Chairman of Saudi National Bank, Credit Suisse’s largest shareholder, announced that the bank would cease purchasing Credit Suisse stock. Credit Suisse has faced numerous structural issues over the past few years, and the news raised concerns among investors that the loss-making institution may face greater difficulty raising capital if needed, especially with expected losses this year given the bank’s restructuring plans. The news received heightened focus today amidst recent U.S. bank failures, with markets trying to gauge if deposit runs will spill into Europe. Credit Suisse Chairman Lehmann said today that the bank’s balance sheet is strong, and analysts note that unlike SVB, the bank has a negligible HTM position. The bank has experienced significant deposit outflows in recent quarters, however, with balances declining ~42% since 1Q22.

Day ahead. Building permit and housing start figures, both expected to increase slightly from last month’s levels, will lead the day at 8:30 AM ET. Philadelphia Fed Manufacturing data will also be released at 8:30 AM.

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