A trader works on the floor during morning trading at the New York Stock Exchange (NYSE) on March 10, 2023 in New York City.
Spencer Platt | Getty Images
Investors flocked to safe-haven assets such as Treasuries and gold on Monday as part of an extraordinary plan to prop up the banking system and limit the impact of the Silicon Valley Bank meltdown.
The reference 10-year cash flow the yield fell nearly 20 basis points to 3.50%, touching the lowest level since Feb. 3. The 10-year rate last traded around 3.54%. The yield on the Cash 2 years fell more than 40 basis points to 4.16%, also the lowest in more than five weeks. Yields move inversely to prices and one basis point equals 0.01%. THE iShares 20+ Treasury Bond ETF jumped 1.6%.
Meanwhile, gold prices hit their highest level since early February at $1,893.96. U.S. gold futures gained 1.2% to $1,889.40, while the SPDR Golden Stufft increased by 1.5% in pre-marketing. Investors tend to turn to the metal during financial shocks. In addition, lower interest rates decrease the opportunity cost of holding zero-yielding gold.
Investors were looking for safety banking regulators rushed to support depositors with money in Silicon Valley Bank and now broke Signature Bank, seeking to allay fears of systemic contagion. Depositors of the two bankrupt institutions will have full access to their deposits under several moves officials approved over the weekend.
“Anxiety about what might be ‘the next shoe to drop’ is spreading through markets like wildfire,” said John Stoltzfus, chief investment strategist at Oppenheimer Asset Management. “We continue to believe that until we are out of the woods yet.”
Stock futures initially opened higher on Sunday night on government plans, but have driven since.
Concerns about the health of smaller regional banks deepened after regulators closed a second institution on Sunday. Bank of the First Republic led bank stocks lower on Monday after it announced on Sunday that it had received additional cash from the Federal Reserve and JPMorgan Chase.
San Francisco First Republic shares lost 70% in premarket trading on Monday after falling 33% last week. PacWest Bancorp fell 37% and Western Alliance Bancorp lost 29% premarket. Zions Bancorporation lost 11%, while KeyCorp fell 10%.
SVB’s collapse marked the largest US bank failure since the 2008 financial crisis – and the second largest on record. HSBC Monday announced an agreement to buy the UK subsidiary of the bankrupt US tech startup lender after all-night talks.