Daily Market Commentary 14th march 2023

US Financial authorities bailed out depositors, in the SVB bank collapse , setting a marvellous precedent for the US banking system. Bailing out Banks is not new to the Fed and the US Treasury Department, following the infamous ‘too big to fail’ , from the GFC. Authorities have decided to back-stop depositors and make available support for other banks impacted by the crises, in the form of loan facilities. This precedent could be considered a nationalisation of banks in America. Privatising profits and underwriting risk, from the public purse. US bond yields collapsed, following the current mini-banking crises, with much of the blame going to the Federal Reserve and their hawkish monetary policy. Market expectations are that the Fed will now temper their hawkish policy, moving forward, thus bond yields collapsed around the world. Support for the US dollar also crashed, with the EUR rising to 1.0720, while he GBP jumped to 1.2150.

Commodity currencies were not immune to the financial turmoil and the wounded reserve allowed these currencies to book gains. The NZD surged back above 0.6200, while the AUD regained 0.6600, in volatile trading. Expect this to continue throughout the week, as markets digest the bank failures and how widespread this could go. There are massive unrealised losses on many balance sheets of financial institutions, which will be marked to market. Will the Fed offer support to all of these? The next question is just how far this support will extend?