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View detailsGoldman trader: The dollar reserve currency system is ending
Recently, in the wake of the Silicon Valley bank failures, there has been more talk of de-dollarisation. It follows reports that central banks reduced their holdings of U.S. Treasuries at the fastest pace in nine years, with emerging markets such as Brazil and ASEAN switching to their own currencies as the latest. Here's what Bobby Molavi, managing director and macro trader at Goldman Sachs, said in his latest market commentary: "One of the things I'm hearing is that the dollar reserve currency system is coming to an end and we're moving to a more multipolar reserve system." He listed the phenomena as follows: Until 2022, the correlation between the price of gold and the yield on the inflation-linked 10-year Treasury note was about 90%. But since 2022, that relationship has broken down (we saw a worryingly similar situation in 2008) - the linear relationship may still exist, but the baseline and convexity have changed. Russia has adopted the yuan as one of the main currencies for international reserves, overseas trade and even personal banking services. The Financial Times reports that more than 50 Russian banks now offer yuan-denominated deposits, and that the yuan's share of Russian export settlement has increased eightfold. Mr Putin has recently spoken out about Russia's intention to increasingly use the yuan for international settlement and could pave the way for petro-yuan. It will be interesting to watch the Middle East's foreign exchange reserves over the next few years. Elsewhere, we've seen India add to the list of countries that settle their international trade in rupees rather than dollars, and we've seen a recent rally in Bitcoin as a potential alternative reserve currency, as some fear the return of quantitative easing and fiat money printing. Risk warning and disclaimer clause The market is risky and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation or needs of individual users. Users should consider whether any opinion, opinion or conclusion in this article fits their particular situation. Invest accordingly at your own risk.
2023-03-31 -
View detailsBetter late than never! The US government plans to tighten regulation of mid-sized banks
Having cleaned up the mess of bank failures and runs, the US government has moved to tighten regulation of mid-sized banks. The White House plans to begin proposing tougher rules for midsize banks as early as this week, according to media reports. Earlier this month, the failure of Silicon Valley Bank, Signature Bank, shook the U.S. banking system. The proposals are expected to call for the Fed and other agencies to write new rules, including for banks with between $100bn and $250bn in assets. Officials said the collapse and chaos caused by two banks with more than $100 billion in assets - Silicon Valley Bank with about $209 billion and Signature with about $110 billion - were a reminder that risks to the financial system do not have to come only from global megalbanks with trillions of dollars in assets. Rohit Chopra, director of the Consumer Financial Protection Bureau and a board member of the Federal Deposit Insurance Corporation, told an industry conference this week that the failure of a bank with $100 billion in assets "does create a lot of systemic risk that eventually spreads throughout the financial system". White House officials are said to have held discussions about calling for legislation to reinstate measures from the 2010 Dodd-Frank law that were rolled back during the Trump administration. But the rollback is supported by some Democratic lawmakers, including some Senate Democrats facing reelection next year. That could make it difficult to pass legislation on the issue. Administration officials have previously discussed the idea of revising federal deposit insurance, either by temporarily extending it to all bank customers or by raising the existing $250,000 limit on insured deposits. But they have yet to agree on a proposal. Fed reconsiders tougher rules for midsize banks Even without new legislation, the Fed itself has flexibility. Reports say the Fed is already reconsidering tougher rules for banks with more than $100 billion in assets. Options include tougher capital and liquidity requirements, as well as measures to strengthen annual "stress tests" that assess banks' ability to withstand a hypothetical severe recession. For now, concerns about the health of regional banks have subsided, especially after the FDIC announced that First Citizens would buy Silicon Valley Bank. In addition, Flagstar Bank, a unit of Community Bank of New York, said it would take over Signature's deposit business. Federal Reserve Chairman Jerome Powell told Republican lawmakers in a closed-door meeting Wednesday that deposit flows in the banking system have stabilized over the past week, according to Rep. Kevin Hern (R., Okla.). In the days following the failure of Silicon Valley Bank and Signature, U.S. bank deposits were transferred from smaller banks to the nation's largest banks. Federal Reserve data released last week showed that deposits at U.S. commercial banks fell by $98 billion between March 8 and 15, but rose by $67 billion at the top 25 banks. However, some small and medium-sized banks could still be at risk in the coming months if they face long-term deposit pressures. SAN Francisco-based First Harmony Bank, which has a large amount of uninsured deposits, has been closely watched by investors despite efforts to improve its health. On Wednesday, a top Fed official blamed the failure of Silicon Valley Bank on bank mismanagement, while acknowledging failures by the Fed and bank regulators. Michael Barr, the Fed's vice chairman for bank supervision, spoke to House lawmakers. "I think any time you have a bank failure like this, it's clearly a failure of bank management, a failure of regulators, a failure of our regulatory system." Risk warning and disclaimer clause The market is risky and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation or needs of individual users. Users should consider whether any opinion, opinion or conclusion in this article fits their particular situation. Invest accordingly at your own risk.
2023-03-30 -
View detailsHuo Lala, which filed for an IPO in Hong Kong, turned a profit for the first time last year, with revenue growing at a compound annual rate of 40%
In recent years, there has been a lot of news about the stock market has finally settled down, to seek a listing in the birthplace of Hong Kong. On Tuesday, March 28, Huo Lala filed a prospectus to list on the Hong Kong Stock Exchange under the name Lala Technology Holdings Limited, or Lalatech Holdings Limited, with Goldman Sachs, Bank of America Securities and jpmorgan Chase as co-sponsors, according to the exchange's website. In June 2021, it was reported that Hualala secretly filed for an IPO and planned to go public in the US to raise at least $1 billion. A month later it emerged that Verala was considering moving its listing from the US to Hong Kong. Last April it emerged that Hualala was seeking a US $500 million funding round at a US $10 billion valuation ahead of its IPO, with a Hong Kong listing likely later than expected due to market volatility. To these news, cargo Lala has been responding that there is no specific listing plan and timetable. Public information shows that Huo Lala was founded in 2013 and grew up in the Guangdong-Hong Kong-Macao Greater Bay Area. It is an Internet logistics mall engaged in intra-city/cross-city freight transportation, enterprise version logistics services, moving, less than 100 trucks, car rental and sale and car aftermarket services. Since its establishment, Hulala has gone through several rounds of financing, with investors including Hillhouse Capital, Sequoia Capital, Boyu Capital, Qingliu Capital, Zhongding Investment, Shunwei Capital, PV Capital, Xianghe Capital, MindWorks Ventures, Zero Venture Capital, etc. According to a prospectus released on Tuesday, the global freight transaction volume (GTV) of the platform reached $6.715 billion in 2022, with more than 427.5 million orders completed. By the end of 2022, Hulala had operations in more than 400 cities in 11 markets, with Unicom averaging about 11.4 million monthly active users and 1 million monthly active drivers. According to consulting firm Frost & Sullivan, in terms of closed-loop GTV in the first half of 2022, Huolala is the world's largest logistics trading platform, as well as the world's largest intra-city logistics trading platform. It is the world's largest logistics trading platform in terms of 2022 average merchant MAUs and completed orders, respectively. According to the prospectus, Huo Lala has enjoyed strong operational and financial growth since its establishment. In 2022, global GTV increased to $7.307.2 billion from $3.7323 billion in 2020, and revenue increased to $1.035.8 billion from $529 million in 2020, representing a compound annual growth rate of 39.9%. In 2022, the company achieved annual profit for the first time since its establishment, with an adjusted profit of $53,233,000 under non-International Financial Reporting Standards and non-IFRS. That compares with an adjusted loss of $155.39 million in 2020 and $631.26 million in 2021. The prospectus explains that Huolala's historic losses in 2020 and 2021 are mainly due to the company's continued investment in expanding scale and operating regions, user growth and engagement, and product innovation. As a result of these investments, Verala has built a large network of deliverers and merchants, established itself as the clear market leader and preferred digital freight service in the cross-city freight market, and laid a solid foundation for the company's ability to grow sustainably and profitably over the long term. These investments have also led to substantial growth in GTV and revenue over the past three years, solidifying the company's position as a long-term market leader. Risk warning and disclaimer clause The market is risky and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation or needs of individual users. Users should consider whether any opinion, opinion or conclusion in this article fits their particular situation. Invest accordingly at your own risk.
2023-03-29 -
View detailsDalio on the Silicon Valley banking crisis: The world borrowed money to invest, and everyone lost money
Ray Dalio, founder of Bridgewater, the world's largest hedge fund, commented on the Silicon Valley banking crisis in a YouTube video on Monday. He noted that the current economic situation is very unique, with widespread value mismatch between the asset and liability ends of the financial sector. Dalio explains: "Banks and insurance companies borrow money at a certain interest rate to make investments such as stocks and bonds, but these investments do not provide sufficient yield compared to the cost of financing. Everyone is losing money as a result." And it's not just the US, it's "across the global economic system". He said: "The whole world is long, and investors are leveraged, borrowing to take these positions because they believe the assets can appreciate." And that puts the Fed in a very difficult position: "It's hard for you to set a rate that is high enough, after inflation, to provide a real return that covers the cost of holding assets for investors while preventing high rates from hurting borrowers." Dalio argues that the Silicon Valley banking crisis was essentially caused by an imbalance: "There is an imbalance between supply and demand at the government level in the US and the government is responding to that with huge deficits, which means issuing more debt. For investors to buy these bonds, they need to offer a high enough real return; Otherwise, investors may sell their bonds to pay off their debts." This caused the value of US Treasuries to fall and the banks that held them, such as Silicon Valley Banks, to face a liquidity crisis. He added that many entities would already be in financial difficulty if they marked their bond holdings to market. Back in 2018, Dalio warned that by keeping interest rates low, the Fed was allowing many institutions to "borrow money to buy stocks, and the market went up because of that." And most investors are too caught up in making money right now to protect themselves, so the next bear market will be painful. He argues that: "You have to create differentiation without adding too much beta to your portfolio to distinguish who earns alpha and who doesn't." Risk warning and disclaimer clause The market is risky and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation or needs of individual users. Users should consider whether any opinion, opinion or conclusion in this article fits their particular situation. Invest accordingly at your own risk.
2023-03-28 -
View detailsAs Silicon Valley Banks Fail, Startups Run out of Money
As a pioneer in the debt financing market and the world's only professional bank in the venture capital circle, Silicon Valley Bank can be said to be the lifeline of American start-ups. Its demise a month ago has left tech VCS and ceos reeling. In California, VL financing (risky debt) provided by Silicon Valley Bank accounts for about 60 percent of all risky debt issued so far this year, according to Preqin. Several tech investors and founders told the media that they believe the failure of Silicon Valley Bank could trigger a chain reaction in an already difficult funding environment, accelerating the closure of many small businesses that have lost support from Silicon Valley Bank and leading to the death of many tech start-ups. "Debt Financing" of Silicon Valley Bank -- "Lifeline" of Small and medium-sized Scientific and Technological Innovation Enterprises Silicon Valley Bank provides enterprises with another source of financing besides equity financing -- debt financing. Compared with equity financing, bond financing can achieve a win-win-win for founders, venture capital and banks capable of controlling risks: Firstly, debt financing can protect the founder's control over the company without diluting the founder's equity too quickly. Secondly, for venture capital, the introduction of venture loan funds can reduce the investment of incubating a single enterprise, disperse operating risks, and lengthen the financing cycle. At the same time, it means that high-growth enterprises will be valued higher in the next round of financing, and the early return on equity investment will be more abundant. And for banks, since start-ups are riskier, they are more willing to pay higher interest on loans, coupled with a small amount of warrants that do not immediately incur a financial burden, as a form of additional interest compensation. Silicon Valley Banks also require that investor and corporate deposits remain in the bank through loan treaties, paying only lower interest rates. In this way, both the liabilities and assets of the bank are guaranteed a higher net interest margin. Uber, Facebook, Airbnb and other companies have adopted risky debt as a financing channel in their development process. But Silicon Valley Bank's venture lending service is almost unique among banks with the ability to manage loan risk and support start-ups. Tech start-ups face an existential crisis Since the Fed started raising interest rates, rising interest rates have made it much harder for tech start-ups to secure equity funding, making them more reliant on debt financing from Silicon Valley banks. In the US, the venture bond market continued to provide a lifeline for start-ups last year, despite a drop in venture capital activity. According to PitchBook, venture capital fell sharply to $238 billion in 2022 from $345 billion in 2021, while total venture debt remained flat at $32 billion. Alessandro Chesser, CEO of fiduciary service Dynasty, believes a Silicon Valley bank collapse would have a devastating impact on the tech industry's ecosystem: "Companies that rely on risky bonds are in a lot of trouble right now. Unless the market turns around quickly, we're going to see a lot of high-value startups go out of business." The founder of a digital health company told the media: "We look at VC debt as a funding option, and we hope it stays that way because uncertainty is the rule of the game. The more backup options you have, the better." He noted that with the failure of Silicon Valley banks, "the environment will change dramatically and it will become more difficult to innovate." With Silicon Valley Bank in government hands and currently being auctioned by regulators, the founders fear that access to debt will dry up and existing loans may even come under pressure. Although the Federal Deposit Insurance Corporation expanded the auction in hopes of finding more potential takers, it has yet to find a buyer. First Citizens is close to a deal to buy Silicon Valley Bank, according to Wall Street sources, who said over the weekend that First Citizens and the FDIC could close the deal as soon as March 26. But as of now, no final decision has been made, and the negotiations may eventually fail. Even if an acquirer is found, few of Silicon Valley Bank's clients in the US or Europe expect business to continue as before. Risk warning and disclaimer clause The market is risky and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation or needs of individual users. Users should consider whether any opinion, opinion or conclusion in this article fits their particular situation. Invest accordingly at your own risk.
2023-03-27 -
View detailsEffective at the end of the month! Hong Kong Exchanges and Clearing Co., LTD. (HKEX) introduced new rules to lower revenue and profit thresholds for technology companies
To further expand the listing framework in Hong Kong, the Hong Kong Stock Exchange on March 24 launched the listing mechanism for specialized technology companies. The new channel allows specialized technology companies to list on the Hong Kong Stock Exchange. The new rules will take effect on March 31. Chapter 18C will be added to the Main Board Listing Rules with effect from 31 March 2023. Companies wishing to list under the new chapter may submit formal applications from that date. This is another long-awaited market reform after the SEHK introduced reforms in 2018, introducing a special listing system to allow eligible unprofitable biotech companies to list, allowing innovative industry companies that adopt different voting rights systems to list, and providing a secondary listing channel for qualified overseas issuers. The new rules are expected to promote greater diversification of Hong Kong's capital markets and broaden investment opportunities for investors. The term "speciality technology company" refers to a company engaged primarily in the development, commercialization and/or sale of products and/or services (speciality technology products) applicable to science and/or technology in the acceptable areas of the speciality technology industry. The new rules will apply to companies in five specialty tech industries: next-generation information technology; Advanced hardware; Advanced materials; New energy and energy conservation and environmental protection; And new food and agricultural technologies. Specialty technology companies usually have high growth potential, and such companies generally have the characteristics of positive investment, which can generate considerable investment demand. However, specialist technology companies have faced difficulties listing in Hong Kong in the past. These companies are usually relatively young and small. Many of them are still in research and development to commercialize their products and/or services. Most of the commercialized companies do not meet the profitability, income or cash flow requirements of the main Board's financial eligibility tests under the existing listing regime. Currently, Chapter 8 of the Listing Rules requires that a company listed in Hong Kong must have revenues of HK $500 million or more in its most recent audited financial year. Section 18C lowers that threshold significantly. The new rules classify specialty tech companies into two categories: (1) "commercialized companies" that have achieved meaningful commercialization; And (2) "Uncommercialized Company". A company with revenues of HK $250 million in its most recent fiscal year is a "commercialised company", otherwise it is an "uncommercialised company". The new rules relax the requirements for income and profitability and replace listing requirements with market capitalization, research and development investment and historical financing. Even if the revenue is less than HK $250 million, if the market capitalisation is greater than HK $10 billion, they can be listed on the Stock Exchange. Stephen Au, chief executive of HKEx Group, said: "This is another milestone in the development of the Hong Kong stock market. New economy industries are rapidly changing the way we live and work. The new listing mechanism we have introduced will enable a new generation of companies in the innovative sector to access the capital market. "Hkex is committed to supporting the needs of issuers and investors. The listing reform introduced in 2018 has made Hong Kong a leading market in Asia for biotech capital raising. This addition of a specialised technology section will support the fundraising needs of more companies and put innovative ideas into practice." In its pre-launch consultation process, the Stock Exchange received 90 non-repetitive responses from a wide range of sectors, including investment firms, professional institutions, potential listing applicants, corporate finance companies and individuals. The proposals received include the following:
2023-03-24 -
View detailsJpmorgan: US Liquidity Not a problem Fed can keep raising rates
The global banking storm this month has raised questions about the Fed's policy path. The Treasury volatility gauge has surged to a new post-pandemic high, sending market participants on a roller coaster ride with moves in the tens of bps. The MOVE Index, a measure of weighted implied volatility, spiked to a high of around 200 on March 15, reflecting the lack of liquidity in the market and the sharp rise and fall in yields. However, jpmorgan believes low Treasury liquidity is not an issue and believes Powell will be able to distinguish between monetary policy decisions and financial stability needs and proceed with a quarter-point rate hike. Jpmorgan strategist Jay Barry and others said in a note published on Tuesday that while U.S. Treasuries have recently experienced some illiquidity issues, measures of market liquidity pressures have not yet breached 2020 highs and the impact on prices is not as severe as it was during the outbreak of COVID-19. In their report, the analysts noted: "The price impact of each transaction in the market has been rising over the past year, but it has not risen significantly in recent weeks and remains below crisis levels. Chaos has increased but it is far from a depressing level." Since the start of the month, the U.S. regional banking crisis has sharply reduced interest rate hike expectations, hitting many funds that bet on a big Fed rate hike. Sharp swings in short-term interest rate futures prices on Wednesday also halted trading in some contracts betting on Fed policy. Futures markets are now pricing in an 80 per cent chance that the Fed will raise rates by 25 basis points this month, marking the first time since the cycle began a year ago that traders have not fully settled on rates before a meeting. The team at jpmorgan wrote in the report: "Treasuries with maturities between seven and 10 years have seen the greatest liquidity disruption, suggesting that most of the liquidation is taking place here." They argue that while high volatility has led to some deterioration in liquidity in the U.S. Treasury market, it doesn't affect financial stability. Risk warning and disclaimer clause The market is risky and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation or needs of individual users. Users should consider whether any opinion, opinion or conclusion in this article fits their particular situation. Invest accordingly at your own risk.
2023-03-22 -
View detailsA number of banks joint requirements! The US government is considering guaranteeing all bank deposits
U.S. government officials are studying how to temporarily extend Federal Deposit Insurance Corp. coverage to all deposits, a request made jointly by a group of banks that they say is needed to prevent a potential financial crisis. According to media reports, Treasury staff are reviewing whether federal regulators have sufficient emergency authority to temporarily insure deposits in most accounts above the current $250,000 limit without formal consent from a bitterly divided Congress. Authorities have not yet seen the need to do so, especially after regulators have already taken steps this month to help banks meet any withdrawal requirements, the report said. Speaking to reporters, White House spokesman Michael Kikukawa did not directly say whether the measure was being studied. He said: "We will use existing tools to support community banks. Since our government and regulators took decisive action over the weekend, we have seen deposit stabilisation at local banks across the country and, in some cases, a slight reversal of outflows." A Treasury spokesman also said in a statement: "As a result of recent decisive action, the situation has stabilized, deposit flows are improving, and Americans can be confident that their savings are safe." Still, media reports said they were working on a strategy to prevent the situation from worsening, a sign of Washington's concern about the situation in the banking sector, with a fourth bank struggling to avoid a similar fate after three lenders collapsed this month as uninsured depositors withdrew their money. On Monday, shares in Kyoho Bank plunged another 47 percent. Over the weekend, the Midsize Bank Alliance asked regulators to extend Federal Deposit Insurance Corp. insurance to all deposits over the next two years, amid concerns that a crisis at small banks could lead to a widespread bank run. In a letter to regulators, MBCA said deposit flight would accelerate if another bank failed. The letter was sent to Yellen, the FDIC, the Office of the Comptroller of the Currency and the Federal Reserve, the report said. A legal framework under discussion to expand FDIC coverage would use the Treasury Department's authority to take emergency action and rely on the foreign exchange stabilization Fund, according to media reports. The money is usually used to buy and sell currencies and to finance foreign governments. But the fund was created in the 1930s and in recent years has been used by the Fed as a backstop for emergency lending facilities. It is the only fund under the sole authority of the Treasury secretary, with other spending and financing under the jurisdiction of Congress. Risk warning and disclaimer clause The market is risky and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation or needs of individual users. Users should consider whether any opinion, opinion or conclusion in this article fits their particular situation. Invest accordingly at your own risk.
2023-03-21 -
View detailsThe Fed joined forces with the five major central banks! Increase the supply of dollars and ease the banking crisis
Before Asian markets opened Monday, the Federal Reserve announced a joint effort with five other major Western central banks to bolster liquidity supplies and ease the banking crisis. The Federal Reserve, along with the Bank of England, the Bank of Canada, the Bank of Japan, the European Central Bank, and the Swiss National Bank, announced Sunday, March 19, 2018, coordinated actions to increase liquidity provision through permanent U.S. dollar liquidity swap lines, the Federal Reserve said in a statement. 'To make the dollar swap lines more effective in funding dollars, the central banks that currently provide dollar operations have agreed to increase the frequency of the seven-day maturity operations from once a week to once a day, starting on Monday March 20 and continuing at least through the end of April,' the statement said. Standing dollar swaps act as "an important liquidity support to ease strains in global funding markets" and, as such, help mitigate the impact of tight lending to households and businesses, the statement said. The dollar swap line was born during the 2008-2009 financial crisis, when the Fed provided temporary dollar liquidity swaps to overseas central banks to address short-term dollar liquidity shortages outside the U.S. at the time. In 2013, the Fed, the UK, Canada, Japan, the European Central Bank and the Swiss National Bank decided to make temporary dollar liquidity swap agreements permanent. Under the agreement, foreign central banks faced with a shortage of dollars could exchange their own currencies for dollars with the Fed, agreeing to pay interest at the same rate in the future. Sunday's announcement came after Swiss authorities, including the Swiss National Bank, approved the historic merger of two financial giants, UBS and Credit Suisse, in an attempt to prevent a disorderly collapse of the country's banking system and a sign of deep concern among central bankers about the recent turmoil in the U.S. and European financial systems. Ubs will buy Credit Suisse for a total consideration of 3 billion Swiss francs, according to a statement also released Monday ahead of the Asian trading. According to the former press, the Swiss government did try to broker the deal. The Swiss government said it would cover some of any losses UBS might incur from its acquisition of Credit Suisse, offering a 9 billion franc guarantee against potential losses. The Swiss National Bank will give Credit Suisse and UBS SFr100bn in liquidity assistance. FINMA, another Swiss regulator, said Credit Suisse's Additional Tier 1 bonds, with a face value of about 16 billion Swiss francs, would be written down to zero, with private investors helping to cover the cost. Moreover, the negotiations for this acquisition deal were initiated by the Swiss Finance Ministry, the Central bank and FINMA. The acquisition deal went on a "fast track", avoiding the process of shareholder voting, and was directly pre-approved by the central bank and other regulators, without the approval of the shareholders of the banks involved. Risk warning and disclaimer clause The market is risky and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation or needs of individual users. Users should consider whether any opinion, opinion or conclusion in this article fits their particular situation. Invest accordingly at your own risk.
2023-03-20 -
View detailsWall Street soul Grilling: Could 'safe' U.S. debt be the tipping point for the next crisis?
In a short weekend, Silicon Valley Bank and Signature Bank collapsed one after another, and the banking crisis continued to spread, even to the century-old investment bank Credit Suisse. The Swiss National Bank has announced an emergency liquidity injection. In this crisis, US Treasuries, traditionally regarded as the safest asset in the world, became the toxic asset at the centre of the maelstrom. Some even think that US Treasuries could trigger the next financial crisis. Chris Crawford, a fund manager at Eric Sturdza Investments, said in a recent report: "Whereas the 2008 financial crisis was triggered by 'ninja loans' to people with no income, no job and no fixed assets, the' toxic 'assets that will trigger the next crisis will be government bonds! Of course, this is not to say that US Treasury bonds are similar to the risky assets in the financial crisis. The reason why government bonds became "toxic" is that the Fed raised interest rates continuously, which led to the decline in the value of the bond market. Some banks that failed to manage the interest rate risk well faced huge floating losses. May be forced to sell debt at a loss to meet depositors' withdrawals. Federal Deposit Insurance Corporation Chairman Glenn Berg has previously said U.S. banks have $620 billion in unaccounted losses on bond investments by the end of 2022. Even if banks can avoid realising their losses or have enough capital to absorb them, worries about bank liquidity could trigger a run on depositors. Silicon Valley Bank is a bloody example. Much of its customer money comes from demand deposits at technology companies. And a significant proportion of the deposit base is not covered by deposit insurance. Such depositors are not bound by services such as custody, cash management or clearing, are rate-sensitive and easily moved. If there is doubt about a bank's solvency, depositors are the first to jump the gun. In a single day, $42 billion was withdrawn from Silicon Valley Bank, plunging it into a liquidity crisis. Neil Dutta of Renaissance Macro Research told reporters that if not for the crisis in the banking sector, this week's uncooled CPI data would have led the Fed to raise rates by another 50 basis points. But the latest data from the futures market showed a 34.3 per cent chance of no rate rise next week and a 65.7 per cent chance of a 25 basis point rise, compared with a 90 per cent chance of a 50 basis point rise before the Silicon Valley Bank explosion. Risk warning and disclaimer clause The market is risky and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation or needs of individual users. Users should consider whether any opinion, opinion or conclusion in this article fits their particular situation. Invest accordingly at your own risk.
2023-03-16