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Coffee With Greta: Bank Contagion


DJIA Futures: -343 (-1.1%)

SPX Futures: -39 (-1.0%)

NASDAQ Futures: -48 (-0.4%)

Good morning friends!

Futures are lower as bank stocks continue to plunge despite emergency action from regulators and the Fed over the weekend.

Let’s get right to it!

Regulators To Protect SVB Depositors

U.S. regulators announced a plan over the weekend to backstop all depositors with money at Silicon Valley Bank and Signature Bank (SBNY).

Depositors at both institutions will have access to all of their money, even over the insured deposit amount of $250,000. 

That access will start today after the banks were taken over by regulators last week. 

The Treasury Department designated both as systemic risks, which gives authority to unwind both in a way that it said “fully protects all depositors”.

The FDIC’s deposit insurance fund will be used to cover depositors. 

The Fed also announced it is creating a new Bank Term Funding Program in response to the turmoil across the banking industry. 

That program is meant to safeguard institutions impacted by the market instability of SVB’s failure.

Banks will be able to get loans of up to one year from the Fed in exchange for high-quality collateral such as Treasurys, agency debt, and mortgage-backed securities.

The Fed said, ​​“This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy. The Federal Reserve is prepared to address any liquidity pressures that may arise.”

The Treasury Department is providing up to $25 billion from its Exchange Stabilization Fund as a safeguard against any potential losses from the Fed funding program.

First Republic Bank Plunges

First Republic Bank (FRC) shares are plunging 60.5% ahead of the open, leading the decline across the banking sector. 

First Republic said Sunday it had received additional liquidity from the Fed and JPMorgan Chase (JPM). 

That move reportedly raised its unused liquidity to $70 billion.

The bank will also likely take advantage of the Fed’s new emergency funding program. 

The founder and CEO said in a joint statement, “First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks.”

The new funding is meant to cover a rush of withdrawals as uninsured depositors are likely to remove their money from regional banks after the collapse of SVB last week.

Other regional bank shares are also plunging with Western Alliance Bancorp (WAL) down 65.6% and Pacwest Bancorp (PACW) tumbling 44.1%.

Investors Rush Into Bonds, Gold

Treasury yields are tumbling this morning as investors flood into the safety of the bond market after the SVB collapse. 

The 2-year yield is down 52 basis points to 4.07% while the 10-year yield is down 25 basis points to 3.46%.

Gold prices are also rallying, briefly topping $1,900 and hitting the highest level since early February.

Uncertainty is spreading across the market about the possible contagion effects of the SVB collapse.

Pfizer To Acquire Seagen

Seagen (SGEN) shares are surging 15.9% in premarket trade after Pfizer (PFE) struck a deal to acquire the company for nearly $43 billion. 

Pfizer will pay $229 in cash per share for Seagen, a 32.7% premium to Friday’s closing price. 

The deal is meant to bulk up Pfizer’s cancer treatments portfolio. 

The drugmaker said it expects more than $10 billion in “risk-adjusted” sales from Seagen in 2030. 

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