Can Powell Avoid Financial Crisis with 25bps Rate Hike?

• SVB Financial Corp (SIVB) saw a 60% decline in share price due to a deposit run that led to the forced selling of assets and a tax loss of $1.8 billion.
• The Unemployment Rate came in slightly higher at 3.6%, while the U.S. economy created +311,000 jobs but was forecasted at +205,000.
• As a result, the markets are pricing in a 25bps rate hike with a terminal rate of 5.50% and then a 25bps cut at the end of the year.

SVB Financial Corp Forced Selling

SVB Financial Corp (SIVB) saw a 60% decline in share price on March 9 while seeing shares plummet a further 40% on March 10 due to a deposit run that led to the forced selling of assets after a tax loss of $1.8 billion. The bank is seeking over $2.25 billion, which had a knock-on effect on the banking sector as the top 4 largest banks saw $52 billion wiped out of their total market cap and were all halted on exchanges as California Regulators closed SVIB – making it the largest bank failure since 2008 and 18th largest bank by total assets in US history.

Unemployment Rate Increase

The Unemployment Rate went up to 3.6% from 3.4%, while U.S economy created 311K jobs instead of estimated 205K jobs forecasted earlier this week; resulting 2-year treasury yield dropped 45 bps from yesterday’s high – biggest drop since 2008 recession period..

Federal Open Market Committee Meeting

At the upcoming Federal Open Market Committee (FOMC) meeting on March 22, markets are pricing in for 25 basis point rate hike with terminal fed funds rate set at 5