Dimon Says, “The American Banking System is Extraordinarily Sound”

Bonds sell-off after First Republic news, influx of corporate bond issuance, PMI beat. Swap rates and Treasury yields rose significantly today after J.P. Morgan purchased First Republic Bank, which calmed sentiment in the banking sector. Elsewhere, a mass issuance of corporate debt strengthened the sell-off, with Meta Platforms ($8.5B) and Comcast ($5B) major contributors. Manufacturing PMI (47.1) also came in above the forecast of 46.8, which immediately drove the 2-year yield ~5bps higher. The 2-year yield rose over 13bps to 4.14%, while the 10-year yield rose ~15bps to 3.57%.

First Republic buyer sees calmer waters ahead. Following First Republic Corporation’s (NYSE: FRC) seizure by the FDIC was an early morning announcement that the bank will be acquired by JPMorgan Chase & Co. The news came after private efforts to rescue the bank failed. JPMorgan acquired $173 billion of First Republic’s loans, $30 billion of securities and $92 billion of deposits. Additionally, JPMorgan and the FDIC agreed to share the burden of losses and potential recoveries on First Republic’s single-family and commercial loans, with the FDIC projecting ~$13 billion in costs to the deposit insurance fund. In his public comments today on the overall health of the U.S. banking sector, JPMorgan CEO Jamie Dimon said that “This is getting near the end of it, and hopefully this helps stabilize everything”, following by saying, “The American banking system is extraordinarily sound.” Some legislators voiced criticism of the solution, however, pushing back against further consolidation of the banking sector. 

Day ahead. Tomorrow’s session will be data-heavy, with factory orders and job opening figures the highlights. Both are set for release at 10 AM, with job openings expected to decrease from last month and factory orders expected to increase.