Treasury yields rise on First Republic news, market prices increase likelihood of Fed rate hike
Treasury yields rose and the futures market estimated an 86 percent chance of a rate hike by the US Federal Reserve next week as more details on a possible one emerged Bank of the First Republic Rescue.
Yields, which move inversely to price, rose Thursday morning after the European Central Bank hiked interest rates by half a percentage point. They rose even further after a late morning report that a group of major banks were discussing a rescue of the First Republic.
CNBC’s David Faber then reported that a group of financial institutions, including JP Morgan And Goldman Sachs, are in talks to contribute around $20 billion to First Republic. Yields moved even further after his report.
“Short-term yields have risen sharply,” said Wells Fargo’s Michael Schumacher. “US 2-year Treasury yields started to rise during ECB discussion but exploded after First Republic news.” The yield was 4.20% in afternoon trade, a sharp rise from the 3.90% it was at around 10:45 a.m. ET, he noted.
Bleakley Financial’s Peter Boockvar said the futures market had moved to price in even higher chances of a Fed rate hike. On Wednesday, the odds of a quarter-point rate hike were about 50%, but Thursday afternoon’s trading saw the odds jump to 86%.
“Rate hike expectations have been rising all morning. Now people can take a deep breath,” Boockvar said.
— Patti Domm
Bank of America and Wells Fargo are among the top contributors to the First Republic’s $30 billion deposit plan
The potential First Republic deposit discussed by major US banks has grown to $30 billion, reports CNBC’s David Faber.
The biggest contributors would come from Bank of America, Wells Fargo, Citigroup and JPMorgan Chase, each with about $5 billion. Morgan Stanley and Goldman Sachs will each pledge around $2.5 billion, the sources said. Truist, PNC, US Bancorp, State Street and Bank of New York will each pledge about $1 billion.
— Jesse Pound
Big tech stocks are driving the market higher
Big tech stocks surged higher on Thursday, shaking off fears of the unfolding banking crisis. Amazon Shares rose 3.3% while Google’s parent company alphabet 3% up. Apple, Meta And Netflix also traded higher.
The strength of the tech heavyweights pushed the major stock averages green during morning trading. Investors could flock to Big Tech to embrace their megacap safety while betting that the current turmoil will keep the Fed from raising rates, benefiting growth stocks.
Goldman says problems in the banks increase the likelihood of a recession
According to Goldman Sachs, the turbulence in the banking sector is putting the US economy at greater risk of recession.
The Wall Street company raised its probability of a decline over the next 12 months to 35%, up 10 percentage points, “reflecting heightened near-term uncertainty about the economic impact of stress on small banks,” Goldman economist Manuel Abecasis said to a customer note Wednesday evening.
Regional bank stocks took a hit on Thursday. The SPDR S&P Regional Banking ETF tumbled 3.7% in early trade.
– Jeff Cox
Group of institutions in talks to deposit about $20 billion in First Republic, sources say
Sources told CNBC’s David Faber that a group of financial institutions — including Goldman Sachs, Citigroup And JPMorgan Chase – is in talks to contribute about $20 billion to First Republic.
The message comes after that First RepublicStock has taken a beating over the past few days, triggered by the collapse of Silicon Valley Bank last Friday and Signature Bank over the weekend.
First Republic shares were down more than 30% earlier in the day. In early afternoon trading, however, the stock fell just 3.3% before being halted on volatility.
— Jesse Pound, Fred Imbert
Source : www.cnbc.com