Monday Morning Meeting Notes (03/20/2023)

General Info:

• Apparently, no one told market participants that March Madness was only supposed to be a basketball tournament! In light of the Silicon Valley Bank collapse, we posted two articles of interest
• Recent Bank Failure Summary
• Time to Clarify FDIC and SIPC Member Insurance Coverages
• We’re continuing to monitor the situation surrounding the banking system as it evolves
• Since writing the first article, a group of large U.S. banks (JPMorgan Bank of America, etc.) provided a $30 billion cash infusion to First Republic Bank, a regional lender
• In addition, U.S. banks borrowed $155.6 billion from a Fed lending program in the past week, topping the previous high from the 2008 financial crisis
• On Sunday, UBS agreed to purchase Credit Suisse for a total of CHF 3 billion (a 60% discount to its closing price on Friday)
• The MOVE Index, which is a measure of bond volatility, rose to its highest level since June 2009
• The 2 Year U.S. Treasury yield posted its biggest three-day decline since 1987 and has declined from 5.07% on March 8^th to 3.84% on March 17^th
• U.S. consumer price index (CPI) data for February was broadly in-line with economist expectations
• CPI rose 0.4% month-over-month and 6.0% year-over-year
• Core CPI, which excludes volatile food and energy costs, rose 0.5% month-over-month and 5.5% year-over-year
• “Supercore” CPI, which measures the services component excluding shelter, continued its upward move as it rose 0.5% month-over-month and 6.1% year-over-year
• The European Central Bank (ECB) raised its main refinancing rate by 0.50%, bringing the rate to 3.50%
• Fun Fact: The Puente de Piedra is a bridge in Lima, Peru which was built in 1610 and is still standing. Its mortar was mixed using 10,000 egg whites instead of water, so it is also known as the Bridge of Eggs.

Monday 03/20:

• ECB President Christine Lagarde appears before European Parliament’s economic committee
• China loan prime rates
• Taiwan export orders

Tuesday 03/21:

• Nike reports earnings
• U.S. existing home sales for February
• U.K. Chancellor Jeremy Hunt takes questions in the House of Commons and appears before the House of Lords economic affairs committee

Wednesday 03/22:

• Federal Reserve (Fed) monetary policy decision and Fed Chair Jerome Powell’s press conference, which will be closely monitored by market participants as the central bank is expected to deliberate on the balance between attempting to slow the pace of inflation while maintaining bank/economic stability
• The current fed funds rate is a target range of 4.50-4.75%, and the expectation is a 0.25% hike
• With the recent concerns surrounding the stability of regional banks, the market-implied odds of a 0.25% rate hike went from 100% to around 60% over the last two weeks
• On March 8^th, the market was implying a fed funds rate of 5.50-5.75% by the end of the year; as of March 17^th, the market is now implying a fed funds rate of 3.75-4.00% by the end of the year
• U.K. CPI data for February
• EIA crude oil inventory report

Thursday 03/23:

• Accenture reports earnings
• Bank of England (BOE) monetary policy decision
• The BOE is expected hike rates by 0.25%, which would bring its target rate to 4.25%
• Swiss National Bank (SNB) monetary policy decision and press conference
• This meeting and press conference will be in focus given the SNB’s announcement over the weekend that it was offering a roughly $100 billion liquidity line to UBS as part of the Credit Suisse deal
• Credit Suisse’s largest shareholder, the Saudi National Bank, said it couldn’t provide any additional financial support due to regulations, as it currently owns 9.9% of the bank’s outstanding shares
• U.S. new home sales for February
• U.S. initial jobless claims
• Eurozone consumer confidence

Friday 03/24:

• S&P Global Manufacturing PMI data for the U.S., Eurozone, U.K., Germany, France, and Japan
• S&P Global Services PMI data for the U.S., Eurozone, U.K., Germany, France, and Japan
• Japan CPI data for February