World’s favorite risk-free asset is looking riskier after SVB
Look deeper into the latest US banking crisis, and the cause may come as a surprise to anyone still thinking in terms of the crash of 2008. It wasn’t dodgy loans to impecunious homebuyers that sank Silicon Valley Bank. It was a stash of what are thought to be the safest securities on Earth: US Treasuries. (Bloomberg Businessweek - The Big Take | Mar 29)
Distress in office market spreads to high-end buildings
Defaults and vacancies are on the rise at high-end office buildings, in the latest sign that remote work and rising interest rates are spreading pain to more corners of the commercial real-estate market. For much of the pandemic, buildings in central locations that feature modern amenities fared better than their less-pricey peers. Some even were able to increase rents while older, cheaper buildings saw surging vacancy rates and plummeting values. Now, these so-called class-A properties, whose rents generally fall into a city’s top quartile, are increasingly coming under pressure. (The Wall Street Journal | Mar 28)
Fed official: Bank rules under review in wake of SVB failure
The Federal Reserve’s bank supervisors warned Silicon Valley Bank’s management as early as the fall of 2021 of risks stemming from its unusual business model, a top Fed official said Tuesday, but its managers failed to take the steps necessary to fix the problems. The Fed official, Michael Barr, the nation’s top banking regulator, said during a Senate Banking Committee hearing that the Fed is considering whether stronger bank rules are needed to prevent a similar failure in the future. (Associated Press | Mar 28)
Banking crisis raises concerns about hidden leverage in the system
As traders rush to identify where the next bout of volatility will come from, some watchdogs think the answer may be buried in the huge pile of hidden leverage that’s been quietly built over the past decade. More than a dozen regulators, bankers, asset managers, and former central bank officials interviewed by Bloomberg News say shadow debt and its links to lenders are becoming a major cause for concern as rising interest rates send tremors through financial markets. (Bloomberg Markets | Mar 27)
Banking crisis raises concerns about hidden leverage in system
As traders rush to identify where the next bout of volatility will come from, some watchdogs think the answer may be buried in the huge pile of hidden leverage that’s been quietly built over the past decade. Loans have been layered up during era of low interest rates. Deeper probes, stress tests likely after recent bank turmoil. (Bloomberg Markets | Mar 27)
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