First Citizens, SVB News Spurs Increase in Rates

Swap rates and Treasury yields climb as confidence in banking sector grows. Treasury yields leapt higher throughout the session, spurred by First Citizens’ acquisition of SVB that proved to be a source of optimism for broader banking sector stability. The KRE rose 0.87% on the day as a result, including massive jumps for First Republic Bank and First Citizens. The 2-year yield rose nearly 23bps to 4.00%, while the 10-year yield rose over 15bps to 3.53%.

First Citizens BancShares Inc. acquires SVB. Regional bank shares ballooned higher at the open after First Citizens’ acquisition of SVB was announced, where First Citizens will acquire ~72bn of SVB’s assets at a discount of $16.5bn and ~$56.5bn of deposits. First Citizens will have $219bn in total assets after the merger, which effectively doubled the size of the bank. The expansion stretches beyond assets as well, with the acquisition providing the bank with a prominent presence in the venture and tech-heavy Silicon Valley, helping to boost share prices by 54% on the session. Separately, the deal leaves nearly $90bn in securities and other SVB assets in the hands of the FDIC, while the FDIC will also get equity appreciation rights in First Citizens with a potential value of $500mm.

Day ahead. Fed voter Michael Barr’s two-day testimony begins tomorrow at 10 AM. The session will be data heavy, with retail and wholesale inventories, consumer confidence, and the Richmond Fed Manufacturing Index set for release.