9 min readWhat Led to The Bank’s Eventual Closure and What Lessons Cash Investors Can Learn From This to Minimize Portfolio Risk On March 8th, Silicon Valley Bank (SVB) announced a significant balance sheet restructuring and an associated $2.25 billion capital raise to shore up the bank’s financial position after rising rates and significant deposit outflows severely…
6 min readIn a speech given in April 2022, Acting Comptroller of the Currency Michael Hsu recalled the ‘chaos’ driven by a series of bank failures during the Global Financial Crisis (GFC) . This resulted in a flurry of acquisitions and unorderly liquidations thrown together to prevent further disruption to the financial system. This experience eventually led…
6 min readLIBOR entered its next phase on January 1st, 2022. The date marked when no new financial contracts could be priced off LIBOR, which underpinned more than $200 trillion in loans , contracts, and derivatives as of the end of 2020. LIBOR (the London Interbank Offered Rate) will still be published as a reference rate for…
6 min readStepping into office with leading and supporting roles open across the government’s top financial regulators, the Biden administration was given a unique opportunity to reshape the financial regulatory landscape. Nominating four members to the seven-member Federal Reserve Board and promoting another to a key position, the Biden Administration has already made an outsized impact on…
5 min readThe COVID-19 pandemic produced the first major test for the U.S. banking system since the 2008 global financial crisis. At the start of the pandemic, questions were posed about how bank balance sheets would hold up amidst a period of social isolation, lockdowns, elevated job losses and a severe contraction in output. Would the banks’…
4 min readThe 2019 mid-September liquidity squeeze in overnight repo markets was perhaps the single most noteworthy event in the cash markets last year. As we noted at the time, the event posed major questions about the post-crisis banking regime and its impact on banks’ ability to lend out reserves. It also asked important questions of the…
2 min readEver since reforms inspired by the financial crisis required prime money market funds to float their net asset values, institutional cash investors have been searching for alternatives that will provide the same type of dollar-in, dollar-out liquidity, safety of principal and yield that the old prime funds offered. And now that the Fed’s interest-rate hikes…
6 min readIs an inverted yield curve still a reliable predictor of an impending recession? And will the recent flattening yield curve affect bank credit quality? Currently, with the narrowest spread between the 2-Year U.S. Treasury bill and the 10-Year U.S. Treasury note since the 2007 recession, both those questions are on the minds of treasury professionals…
2 min readIf you’re a cash investor waiting for bank deposit yields to catch up with the Fed’s interest rate hikes, don’t hold your breath. The so-called “deposit beta,” which measures how fast banks raise their rates as a percentage of the increase in the federal funds rate, has risen at a snail’s pace compared to previous…
9 min readAbstract Deposit rates are starting to increase as we move further into a rising rate environment. Banks still have not rewarded depositors sufficiently with a 21% average deposit beta, although some executives expressed moving it above 50%. The wait for higher rates continues unless depositors are willing to consider market-based instruments. There, several options exist…