The NEW Banking Crisis In One Chart (Hint: Inflation = Fed Rate Hikes = Treasury/MBS Duration Increases = Bond Losses = Bank Runs) Bond Volatility Highest Since 2008

So, the Biden Administration made a horrible error by guaranteeing deposits at Silicon Valley Bank for deposits over $250,000. Essentially, Biden bailed out big tech that kept their deposits at SVB.

But what triggered the run on SVB and other banks? Simple. Biden and Congress spent like drunken sailors with Covid and The Federal Reserve went nuts printing money. Viola! We got inflation. But with inflation came The Fed’s attempt to get inflation back to its 2% target (difficult since Biden/Congress refuse to return spending to pre-Covid levels). But as interest rates rise, duration (weighted average life of MBS) rose dramatically meaning that risk increased. But banks like SVP ignored the risk, or didn’t hedge, or were spending time worrying about non-bank related issues.

So, what happened? Banks are holding Treasuries and MBS (orange line) that are getting clobbered with rate hikes (yellow line).

Talk about volatility. Today, the 2-year Treasury yield is up over 20 basis points as bond volatility hits levels last seen in 2008, just prior to the subprime credit crisis.

So, Biden’s bailout of SVP depositors stopped the deposit run for the moment. But if The Fed keeps hiking rates, banks are going to be hurting worse and worse. They could rebalance their portfolios and/or hedge. But with Uncle Spam (Biden) at the helm, bailouts are always on the table.

Don’t Cry For Argentina! Inflation Hits 102.5% As M2 Printing Hits 80% YoY (Suicide By Printing Press)

Don’t cry for Argentina! Their leaders did this to them.

Argetina’s inflation rate just hit 102.5% as their M2 Money printing hit 80%

Argentina’s central bank is considering raising its benchmark rate on Thursday for the first time since September after inflation data showed prices increased by more than 100% annually last month, according to two people with direct knowledge.

The monetary authority’s board will consider an increase after leaving the key Leliq rate unchanged at 75% for several months, the people said, asking not to be named discussing internal decisions. The board has not yet decided on the size of the hike in case they opt for such move, they said.

A cautionary tale for Washington DC spendacrats and Fed officials.

Brought to the same country that gave us Statist Juan Peron and his wife Eva.

Reversal Of Fortune! Fed Expected To Hike Once By 25 BPS, Then Cut Rates By 125 BPS By End Of 2023

Market now expects FED to hike max. one more time by 25bps followed by 125bps cuts in total by end of 2023.

And bond volatility is up the most since … the last financial crisis.

No, not the Klaus von Bulow “Reversal of Fortune.” Just a Fed/Biden murder of the US economy.

Credit Suisse Hits New Low as Top Holder (Saudi National Bank) Rules Out Bigger Stake (US Treasury 2Y Yield Falls -40.4 Basis Points, 10Y Treasury Falls -24.8 Basis Points)

Apparently, the NEO financial crisis (not the subprime, but The Fed’s “too low for too long” crisis) is still with us.

Credit Suisse Group AG’s top shareholder, whose stake has lost more than one-third of its value in three months, ruled out investing any more in the troubled Swiss bank as a bigger holding would bring additional regulatory hurdles.

“The answer is absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory,” Saudi National Bank Chairman Ammar Al Khudairy said in an interview with Bloomberg TV on Wednesday. That was in response to a question on whether the bank was open to further injections if there was another call for additional liquidity.

Credit Suisse says it has identified material weaknesses in its internal control over financial reporting as of December 31, 2022 and 2021, according to the annual report.

The material weaknesses relate to the failure to design and maintain an effective risk assessment to identify and analyze the risk of material misstatements in its financial statements and the failure to design and maintain effective monitoring activities relating to:
– Providing sufficient management oversight over the internal control evaluation process to support the Group’s internal control objectives
– Involving appropriate and sufficient management resources to support the risk assessment and monitoring objectives
Assessing and communicating the severity of deficiencies in a timely manner to those parties responsible for taking corrective action

And it could simply be that Credit Suisse was caught in the Central Bank “Bear Trap” where banks get clobbered as interest rates rise.

Credit Suisse’s CDS (credit default swap) is soaring!

And on the “it ain’t over till its over” news from Credit Suisse, the US Treasury 2-year yield plunged -40.4 basis points.

And the US Treasury 10-year yield plunged -24.8 basis points.

The official logo of the Federal Reserve should be Munch’s The Scream.

Let’s get ready to stumble!

Markets Still Stressed Despite Fed Guarantees For Depositors (Volatility Spread In STRESSED Range)

Well, the banking fiasco CREATED BY THE FEDERAL RESERVE is still with us. Why? Because the FDIC guaranteed deposits above $250,000 for the first time in history, bailing out millionaires/billionaires. I call this Crony Socialism (but I repeat myself).

Congress doesn’t understand banking, only how to spend money.

Gold Soars 2% On Failure Of Fed And Bank Regulators

All together now. The Fed has been printing too much money for too long and Biden restricts fossil fuel production. Ad in rampant Federal spending and we have INFLATION. Inflation led to The Fed to raise rates. And with rate increases and down go the banks.

Of course, The Fed and Biden Administration will overeact (e.g. offering deposit insurance on ALL deposits above $250,000 creating moral hazard risk). As such, we are seeing gold prices soar by 2% this AM.

In adddition to gold rising 2%, natural gas futures are up 6%

February Jobs Report Comes In Hot, Hot, Hot (Avg Hourly Earnings UP 4.6% YoY, Too Bad Inflation Is At 6.4% YoY)

According to the US Bureau of Labor Statistics (BLS)https://www.bls.gov/news.release/empsit.nr0.htm, the February jobs report came in hot, hot, hot.

One indicator that the Biden Administration will herald is that average hourly earnings rose to 4.6% Year-over-year (YoY). Too bad headline inflation is still at a whopping 6.4% YoY.

More jobs were added to the US economy than forecast (311k actual versus 225k forecast). The U-3 unemployment rate rose to 3.6% from 3.4% in January.

The biggest gainer in jobs? Food services and drinking places, of course, at 69.9 k jobs added.

The aftermath of the jobs report? 2-year Treasury yields are down a whopping -15.8 basis points. But Europe is seeing double digit declines in sovereign yields as well.

At the 10-year tenor, we see the US Treasury yield drop -12.8 basis points. Much in line with European sovereign yield declines.

US Mortgage Rate Rise To 7.13% As Inflation Remains And Fed Counterattacks

As Americans are painfully aware, inflation is still haunting us. Despite Administration proclamations that inflation is declining, it is rising again. And with rising inflation (and an overheated labor market), The Federal Reserve is in full counterattack mode, withdrawing stimulus and raising rates.

And with Fed tightening comes rising 30-year mortgage rates.

Out of boredom, I watched the Clive Barker film “Hellraiser” and noticed perpertual Democrat Presidential candidate Hillary Rodham Clinton in the cast as the female Cenobite.

Give The Fed 3 Steps! The Fed’s Overreaction To Covid Shutdown (Over Twice The Reaction To The Crippling Financial Crisis Of 2008/2009)

There is a fascinating film about the 2008/2009 financial crisis called “The Big Short.” Actually, Iiked a similar film a little more called “Margin Call” where the infamous fire sale of securities (primarily subprime asset-backed securities).

But despite how bad the financial crisis of 2008/2009 was, the growth of Fed assets on it balance sheet (orange oval) paled in comparison to The Fed’s overreaction to the Covid outbreak of 2020. And the government shutdowns and mask mandates.

The good news? The rate of growth YoY of both The Fed’s balance sheet and M2 Money is negative. But it is still startling to see the comparison of Fed reactions to crises.

Give The Fed three steps to catch up to the mayhem they created. Particularly in inflation home prices.

They call Janet Yellen, former Fed Chair and current Treasury Secretary “The Breeze” because idiotic monetary policies just blow over her head.

After all, The Fed is way behind the curve on raising rates.

All this is happening as the interest paid on our rapidly expanding Federal debt is getting Titanic-like.

Dazed And Confused! Treasury Flows Show Bullish $2.5 Billion Shift to ST Sovereigns Versus S&P 500 (Credit ETFs Hammered by Record Outflows of Almost $12 Billion As Fed Worries About Inflation)

The Federal Reserve is dazed and confused about inflation.

As The Federal Reserve reaffirms their draining of the monetary punch bowl, we are seeing investors flock towards the bond market. Particularly the iShares Short Treasury ETF. $2.5 BILLION to be exact.