Bonds issued by banks and other U.S. financial institutions are feeling the heat from the collapse of sudden California's Silicon Valley Bank and Signature...
Bonds issued by highly rated banks and U.S. financial institutions were under pressure on Monday after the sudden collapse of Silicon Valley Bank and Signature Bank sparked concerns about the banking system.
Bonds issued by banks and financial companies, like their stock prices, were some of the biggest movers on Wall Street on Monday. Here’s a visual look at the spread on 10-year bonds of seven financial companies on Monday compared with the start of the year, from BondCliQ, showing a big upward swing since Friday.
On Monday, SVB Financial Group SIVB , the parent of the failed Silicon Valley Bank, saw its 2.1% coupon bonds due May 2028 quoted at a weighted average spread of 1,582 basis points above Treasurys, according to MarketAxess. Crypto-friendly Signature Bank SBNY was closed Sunday, with the Treasury Department, Fed and Federal Deposit Insurance Corp. quickly stepping in to ensure all deposits of both banks would be made whole. The Fed on Sunday also rolled out a new lending facility to help banks meet withdrawal requests, without having to sell securities at a loss.
Many companies, including those in the financial industry, were able to borrow cheaply in the past few years after the Fed slashed its policy rate to almost zero in an effort to keep credit freely flowing during the pandemic.
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