The Silicon Valley Bank (SVB) and Signature Bank collapsed [Video]

Ipek Ozkardeskaya Swissquote Bank Ltd

SVB’s flash crash raised questions that other similar local banks in the US could also experience liquidity issues and may not be able to pay their depositors back, unless they also start selling their probably loss-making portfolios.

The US authorities now step in to avoid contagion.

The bank crisis will likely interfere with Federal Reserve (Fed) rate hike expectations.

Activity in Fed funds futures now assesses more than 98% chance for a 25bp hike in March, not because the US jobs data was soft enough to overhaul rate hike expectations last Friday, but because the Fed can’t ignore the issues caused by the steep interest rate increases in the banking sector and can’t afford to trigger a financial crisis to bring inflation back to 2%.

Tomorrow’s US inflation data is still important, but the developments across the banking sector could overshadow the data.

Author

Ipek Ozkardeskaya

Swissquote Bank Ltd

Ipek Ozkardeskaya began her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked in HSBC Private Bank in Geneva in relation to high and ultra-high-net-worth clients.

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