BONDS, HIATUS ..... March 24, 2023 Bond market volatility since last week has been VERY high - first, Powell's talks, then, 3 bank failures in 4 days, and then, the rescue package. MOVE was 173.59 today. Even the 3-mo T-Bills had noticeable rate changes from the market open to their auction time.
Blood in the Streets SCHW etc TFC fell 17% today. Held some for a few months a year ago. Not a bad ride at the time. Whew!
Looked like a good bet at the time. Large growing regional bank. Headquartered in Charlotte NC. Conservatively run. Diversified investments. Hard to believe it could fall that much in a single day.
BONDS, HIATUS ..... March 24, 2023 Hi
@AndyJ I just looked at the
1yr UST, in particular, and from March 8 (Wednesday) through today, March
13 (Monday) finds a -
18.
1% yield drop. One heck of a swing for UST yield in a short time frame.
How much fear is in the air about SVB and the greater implications? Thanks.
But I did get my three mile hike on the beach in first
+
1My hike today was on an ice & snow covered beach in balmy 27 degree temps with a 25 mph wind blowing. In a couple weeks I’ll be hiking on a much warmer beach, if only for a week.
Some things are much more important and rewarding than watching the markets.
Silicon Valley Bank: Greed and Stupidity Strike Again Early on in this post I posed the following question:
Question: If a major source of the problem is that Silicon Valley Bank was forced to sell US Gov't securities at a loss because their current value is less than their maturity value, why would the FDIC or any other "rescue" authority do the same thing? Rather than take an immediate loss, why wouldn't a "rescue authority" provide immediate funding equal to the actual maturity value of the underlying assets, and then retain those assets until they actually mature, thus minimizing the loss due to the maturity problem?
And from today's commentary by Matt Levine's "Money Stuff" of Bloomberg Opinion:
The FDIC and other banking regulators spent the weekend trying to sell SVB, apparently with no luck. Here is what they came up with instead:
The Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. jointly announced the efforts aimed at strengthening confidence in the banking system after SVB’s failure spurred concern about spillover effects. ...
The Fed in a separate statement said it’s creating a new “Bank Term Funding Program” that offers loans to banks under easier terms than are typically provided by the central bank.
Fed officials said on a briefing call that the facility will be big enough to protect uninsured deposits in the wider US banking system. It was invoked under the Fed’s emergency authority allowing for the establishment of a broad-based program under “unusual and exigent circumstances,” which requires Treasury approval. ...
Under the new program, which provides loans of up to one year, collateral will be valued at par, or 100 cents on the dollar. That means banks can get bigger loans than usual for securities that are worth less than that — such as Treasuries that have declined in value as the Fed raised interest rates.
My proposed solution was met with dismissive comments by knowledgeable MFO contributors. Evidently very high federal financial officials saw some merit in the concept.
Right Now: Treasuries vs CDs Buy 3 mo, 6 mo and 12 mo treasury bills and hold till maturity as a ladder. Every 3 months you will have cash available. Build a second ladder 6 weeks later in between the first one in order to reduce time for available cash.
Buying at auction (pay attention to the schedule) is easiest way to get started.
Schwab, First Republic, Zion, bank loan and preferred funds bloodbath "Curiously, SNSXX (pure treasury) is yielding a few basis points more than SNOXX (treasuries and repurchase agreements backed by treasuries). We'll see how they compare tomorrow.
https://www.schwab.com/money-market-funds#bcn-table--table-content-89811"
@msf - I noticed that as well. Could it be because the Weighted Average Maturity for SNSXX is 34.7 days vs 7.0 days for SNOXX and rates are coming down?
Schwab, First Republic, Zion, bank loan and preferred funds bloodbath
Speaking of CDs, a few minutes ago I bought a 50k/1 year Santander Bank CD at Schwab: 5.25%.
You done good. Congratulations.
Schwab, First Republic, Zion, bank loan and preferred funds bloodbath "I just walked past a First Republic branch (no lines outside, seemed sedate inside). The window had a sign for a 60 day 4.25%"@msf- That is indeed very unusual for First Republic. Normally their CD offerings to bank customers is paltry... typically several points lower than available at Schwab, just across the street on West Portal Avenue. We use First Republic for checking, but I wouldn't be interested in much else there right now. In fact, I've scheduled transfers to Schwab and Chase to draw down the First Republic checking account, at least for the time being.
Speaking of CDs, a few minutes ago I bought a 50k/
1 year Santander Bank CD at Schwab: 5.25%.
FLASH: about 3:00 a.m. EDT Monday re: SVB-UK +1.
Schwab, First Republic, Zion, bank loan and preferred funds bloodbath Retail-prime SWVXX may have gates or redemption fees without much notice. That may be a problem for check writing and other essential payments. SNSXX is a government/Treasury money-market fund with much lower probability for that.
Arguably zero probability w/o significant (technically "appropriate") notice. Government MMFs have to opt in to gating. If they don't opt in initially, they first have to give notice of opting in before they even begin the gating process.
As a government money market fund, the fund’s Board of Trustees (the Board) has determined not to subject the fund to a liquidity fee and/or a redemption gate on fund redemptions. Please note that the Board has reserved its ability to change this determination with respect to liquidity fees and/or redemption gates, but only after providing appropriate prior notice to shareholders.
Summary ProspectusCuriously, SNSXX (pure treasury) is yielding a few basis points more than SNOXX (treasuries and repurchase agreements backed by treasuries). We'll see how they compare tomorrow.
https://www.schwab.com/money-market-funds#bcn-table--table-content-89811I'll stick with Vanguard. VUSXX 4.56% 7 day yield.
https://investor.vanguard.com/investment-products/mutual-funds/profile/vusxxRegarding CDs - I just walked past a First Republic branch (no lines outside, seemed sedate inside). The window had a sign for a 60 day 4.25% CD. Any takers?
Blood in the Streets SCHW etc I bought some SCHW at 51+ this morning. I had considered it on Friday but decided to see how the weekend went. It touched 45 early this morning, but I spent some time looking for data and opinions before pulling the trigger.
I'm somewhat nervous about taking this position, because this is not an industry I've followed (even though I've had some BAC for years).
Everything in the financial industry has been tarnished. I considered adding to my AXP position (down about 10% in the last month) but don't really see this as a big buying opportunity (yet).
CNBC has had some interesting guests through the day. Brad Gerstner of Altimeter Capital for one.
The world of big banks seems much more complicated than the banking issues most of us have encountered in our lives. So their "governance/regulation" is pretty complex.
Like many other "large" issues in our economy, there are often no easy answers.
David
How much fear is in the air about SVB and the greater implications?
Right Now: Treasuries vs CDs True, I moved some of my savings to a 4.9% 19-month CD at Synchrony this AM. They had one still at 5%, the 14-month one.
Right Now: Treasuries vs CDs I see
1-year Treasuries at 4.9% currently, and six month ones at 5.2%:
https://ustreasuryyieldcurve.com/But that assumes you are buying Treasuries directly I imagine.
Right Now: Treasuries vs CDs Looking at Schwab just now, short-term (1 yr) Treasuries are running around 4.5%, but bank CDs are still around 5.25%.
