Search
All
Economics
Politics

SVB Will Not Slow Fed Interest Rate Hikes, Expect a Half Point in March

•

•

31 comments on SVB Will Not Slow Fed Interest Rate Hikes, Expect a Half Point in March

•

Competing Views 

  1. Hours after Silicon Valley Bank had been shut down by FDIC, Richmond Fed president indicated he remained open to 50 basis point hike at March Fed meeting
  2. Fed’s foot ‘unequivocally’ on brake, sensible to move slower, Barkin says

https://twitter.com/StevieGhandiz/status/1634661365125087235

Over-Under Line is 50

Target Rate Probabilities for March 2023 

Target rate probability for March from CME Fedwatch

The immediate reaction from market participants was a reduction in the odds for a 50 basis point hike from 70 percent to 40 percent. 

That lasted a day. 

The odds of 50 basis points is now back up to 68.3 percent. 

I believe that is the correct view. The last thing the Fed wants to do is send a signal to the markets that it will always be there to bail out mistakes. 

Also, crypto is involved in this mess and the Fed will not want to help those speculators either. 

So, unless there is a much greater contagion, don’t look to the Fed for any help.

Rate Hike Odds Background

Regarding bullet point #2, some people claim that Circle is not caught in a lie. Sorry it is, and their updated website proves it.

Image from Circle website, question by Mish.

Proven Lie

1. Circle now understands that it is not 100% backed by cash and short term treasuries does it not?

2. Since it does, the March 9 chart is a lie by Circle. Period.

Circle should post an accurate chart with an explanation of the true nature of its backing. And the facts better show that Circle is not knowing involved in speculation of long term assets. 

We have no such explanation from Circle. Why?

Perhaps Circle can explain, but if it can, then why the delay? Is that not a fair question to ask?

I also want to see what the duration is on Circle’s assets held at Blackrock. 

This post originated at MishTalk.Com.

Thanks for Tuning In!

Please Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

If you have subscribed and do not get email alerts, please check your spam folder.

Mish

Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

This post originated on MishTalk.Com

Thanks for Tuning In!

Mish

Mike Shedlock

Recommended Articles

Comments to this post are now closed.

31 Comments
Newest
Oldest Most Voted
Inline Feedbacks
View all comments
StukiMoi
StukiMoi
2 years ago
“So, unless there is a much greater contagion, don’t look to the Fed for any help.”
And therein lies the rub…..
Since, as all well indoctrinated illiterates have been told, and can be counted on to be well indoctrinated, illiterate and nothing else enough to so-called “understand”: Thiiingz are always diiiiiferent thiiis time.
There is no room for “contagion” in economics. Prices simply adjust until markets clear. That’s it. Always. Things are never different. Never “special.” Even something as unreliable as Gravity doesn’t sometime work upwards. And; being pure crystalline logic; rather than just empirically derived rules of thumb; all of economics leave much less room for “sometime different” than that.
Of course, the average self styled “investor,” here in the late dumbage, would no doubt believe that if “we” just “invest in it”, gravity will stop its mean fat-shaming fatsos by making them feel heavy, as well. As long as some illiterate “billionaire” says so on TeeVeee, you know..! And it’s, like, AI and Like future and tech and, like, you know!
0
0
Lisa_Hooker
Lisa_Hooker
2 years ago
Reply to  StukiMoi
Our problems began when the Governments became a large and significant, bordering overwhelming, portion of the “markets.”
A broad, independent “market cleared” interest rate doesn’t seem to have been around for quite a while.
I guess the primary dealers must be representative of the markets as a whole. /s
0
0
Salmo Trutta
Salmo Trutta
2 years ago
The FED doesn’t need to raise the cost of savings. It needs to reduce the growth of the money supply (FED credit).
0
0
Lisa_Hooker
Lisa_Hooker
2 years ago
Reply to  Salmo Trutta
The Fed shouldn’t wait for slowing money supply growth.
The Fed needs to get cash out of the economy right now.
Before we are all inflated to death.
0
0
QTPie
QTPie
2 years ago
Given the giant drop in treasury yields on Friday (the 2-year actually posted the largest single-day drop in 15 years), I would say the market is now expecting a .25 rate bump, then a pivot in the second half of the year.
0
0
8dots
8dots
2 years ago
Fake after fake, a pyramid of fakes. SVB parked it’s money In US treasuries. 1) Banks “available for sale” bonds portfolio unrealized
losses reduce equities, but excluded, hidden, from banks earnings.
2) “Held til maturity” hide unrealized losses from both equities and earnings. Banks unrealized losses might exceed $1T, with or without mishmatches.
3) Earnings might rise, but there is a little bookkeeping trick behind it.
0
0
Lisa_Hooker
Lisa_Hooker
2 years ago
Reply to  8dots
“What did you want the earnings to be?” – signed, the accountants.
0
0
8dots
8dots
2 years ago
Covid and NATO/ Putin mismatch are the causes. The responses are the symptoms. China silk road disappeared
in Ukraine sinkhole. If Shi resolve this mismatch the global econ might get a jump start. SVB collapse is a Global “event”.
It might be resolved this weekend at 60/70 cents/dollar.
0
0
Nuddernoitall
Nuddernoitall
2 years ago
Under.
0
0
Matt3
Matt3
2 years ago
I think it will be 1/4 point. The Fed is now realizing that they will break things. It’s a stupid policy any way. The Fed can not eliminate inflation while government spending is simulative and policies are inflationary. They need to stop pretending that they can. The only thing the can do is break financial markets and destroy the economy.
By the way, the mismatching of duration at banks is a function of the system. The worst mismatch of all is the Fed itself. I think if they were required to mark the portfolio to market, they would be insolvent.
0
0
JackWebb
JackWebb
2 years ago
Reply to  Matt3
Duration mismatch is typically counterbalanced by a combination of reserves, liquidity, and confidence. All of that vanishes when a “bank” becomes insolvent.
0
0
Matt3
Matt3
2 years ago
Reply to  JackWebb
Reserves never cover the entire mismatch. Liquidity is planned for through emergency lines. Confidence is the final killer. No bank can survive a run off of deposits in a major way. Confidence in the bank or confidence in the system and protections is imperative.
The confidence must not be pissed away. That’s why the depositors will be made whole at SVB. Making them whole ASAP will keep other runs from happening and allow the FDIC and Federal Reserve bank regulators to access and address other deficiencies in the system. I’m sure there are others.
0
0
JackWebb
JackWebb
2 years ago
Reply to  Matt3
A bailout will probably happen, but it will be a disaster because it will underscore the phoniness and corruption. The only constructive way to do it is to bite the bullet and let them hang. Really. We’re at a crossroads. A bailout will not do what you think it will. It will do the opposite to the financial system.
0
0
Lisa_Hooker
Lisa_Hooker
2 years ago
Reply to  Matt3
The real confidence was pissed away by Greenspan’s cuts to 1% money in 2003.
It was never fully restored.
The majority of current traders were pubescent during the GFC.
Highly inexperienced is an inadequate description.
0
0
dtj
dtj
2 years ago
I’ll reiterate my prediction that the rate hikes are over. One more 25 basis point hike (just for show I might add) and that’s it. SVB failure effectively puts a stop to the rate hikes. The economy simply can’t handle it, inflation be damned.
Nobody seems to be paying attention to the Bureau of Lies and Statistics showing little to no inflation over the last six months. Soon the MSM narrative will be that inflation is conquered, thus justifying the halt in rate hikes.
Don’t believe your eyes about inflation – believe the lies.
The rate hikes are over.
0
0
Matt3
Matt3
2 years ago
Reply to  dtj
Yep. The government controls the statistics. A little tweak here and there and presto – inflation is solved! The they can keep rates lower than real inflation and lower debt to GDP – just like the did after WW2.
0
0
Scooot
Scooot
2 years ago
Reply to  dtj
It’s next year, election year, they’ll need to market their pat on the back.
0
0
JackWebb
JackWebb
2 years ago
I’ve radically scaled back my commenting here but wanted to say that I don’t think this should keep the Fed fron tightening. The Silicon Valley Fraud … er, Bank … collapse has nothing to do with Fed policy in my opinion. It looks like a classic duration mismatch, with inadequate reserves. Borrow short, lend long, don’t keep enough liquidity on hand. The rest is details, but the underlying issue is simple Finance 101. Let’s hope that other banks aren’t as stupid and as corrupt as that one. Note my use of the word “as” there.

I have to look to see whether their long assets were just Treasuries or whether there were mortgage-backs in there. At the moment I’m not sure, but I’m focused on duration matching and reserve maintenance. These are basics in finance. If the big players in the U.S. financial system are THAT stupid, to quote Mae West, it’s going to be a bumpy ride.

0
0
MarkraD
MarkraD
2 years ago
I’ll take the under.
While CPI/PCE is still up, it’s slowing, participation jumped and wages showed signs of slowing too, I have to assume the Fed’s watching construction/permits & home sales, now after a year of hikes it would seem to be a good time to slow and observe the latent effects.
Disclaimer: I have a bias, I like a strong economy.
.
0
0
MPO45v2
MPO45v2
2 years ago
Reply to  MarkraD
The internet whispers…”doesn’t matter what interest rates will be because a ‘correction’ is being orchestrated for Sept/Oct of 2023.” You can be part of the audience, part of the band or the conductor or some bum out on the street waiting to get run over. Choose wisely.
0
0
PapaDave
PapaDave
2 years ago
Reply to  MarkraD
“Disclaimer: I have a bias, I like a strong economy.”
How refreshing. It seems the majority here are always rooting for: recession, depression, inflation, deflation, job losses, wage cuts, destruction of all worker protections, market collapse, and pain to be inflicted on everyone they don’t like.
Fortunately, I can hit the IGNORE button on the worst of them.
0
0
Matt3
Matt3
2 years ago
Reply to  PapaDave
I sure agree with that. I may worry about inflation and market collapse but I want to see a strong prosperous economy with very high employment and wages (and productivity) rising faster than inflation. In the long run, that’s best for us all
0
0
worleyeoe
worleyeoe
2 years ago
Reply to  Matt3
The REAL problem is that housing is incredibly expensive. There needs to be an orderly drop in prices to the tune of 25-30%.
And the reality is that doesn’t happen without a modest recession where unemployment rises to 5% and stays there for at least a year.
But, the MMT mongers like Elizabeth Warren aren’t going to let that happen. They don’t believe in letting market forces burst asset bubbles.
0
0
Jojo
Jojo
2 years ago
Reply to  worleyeoe
The only way we would see a 30% drop in housing is for the government to try to force people to stop using housing as an investment.
They would have to remove the interest deduction for houses, the capital gains exclusion on a sale, the ability for foreigners to buy houses here and the ability for corporations to buy/rent houses.
0
0
Rbm
Rbm
2 years ago
Reply to  worleyeoe

Imo there are two problems with housing. 1 Unaffordable for a large amount of people. 2 you cant lower the cost of housing without destroying the wealth of a large number of people who bought into the system.

0
0
worleyeoe
worleyeoe
2 years ago
Reply to  MarkraD
Right, and you’re probably in the top 10% or less in terms of income. If so, you’ve remained virtually unscathed by inflation. You can afford to remodel your home and may be able to afford a 2nd home.
To that end, everyone will say they like a strong economy but it’s the egregiously priced houses, cars, airline tickets, etc that make it hard for the bottom 80% to get along.
And the real problem, as stated below, is that we now live in a time when the Fed, Congress, et al will go to great lengths to keep housing from tanking and letting market forces drive prices lower. What’s happened to date is nothing more than the froth being lapped away for those top 8 markets.
0
0
tedr
tedr
2 years ago
I agree 100%. The Fed’s purpose is to handle inflation and not worry about banks and bankers that make stupid decisions at their trading desks.
0
0
Mish
Mish
2 years ago
Reply to  tedr
Unless there is far more contagion, and that looks less and less likely the more I look (post coming up) this will cause some heartaches but no disasters.
I do expect criminal indictments.
Ugh – lots to write about today and no time for it all.
0
0
Matt3
Matt3
2 years ago
Reply to  tedr
You are 100% incorrect. The Fed is the regulator of federally charter banks and their number 1 priority is the health and stability of these banks.
They are a private enterprise owned by the banks. Priority number 1 is to serve their owners.
0
0
worleyeoe
worleyeoe
2 years ago
Reply to  tedr
Go back in time to circa September 2008 and tell that to Bernanke.
0
0
Lisa_Hooker
Lisa_Hooker
2 years ago
Reply to  tedr
The Fed’s job is to row the whaleboat through the crashing breakers and save what they can.
0
0

Stay Informed

Subscribe to MishTalk

You will receive all messages from this feed and they will be delivered by email.