A trader works on the floor during morning trading at the New York Stock Exchange (NYSE) on March 10, 2023 in New York City.
Spencer Platt | Getty Images
Investors flocked to safe-haven assets such as Treasurys and gold on Monday amid an extraordinary plan to prop up the banking system and limit the impact of the Silicon Valley bank meltdown.
The benchmark 10-year Treasury yield fell nearly 20 basis points to 3.50%, touching the lowest level since February 3. The 10-year rate was last traded around 3.54%. The two-year Treasury yield fell more than 40 basis points to 4.16%, also the lowest in more than five weeks. Yields move inversely to prices and 1 basis point equals 0.01%. The iShares 20+ Treasury Bond ETF jumped 1.6%.
|specific||a company||fruit||changes||% is changing|
|US1M||US Treasury for one month||4.463%||-0.261||0.00%|
|US3M||US Treasury for 3 months||4.664%||-0.291||0.00%|
|US6M||US Treasury for 6 months||4.681%||-0.448||0.00%|
|US1Y||US Treasury for a year||4.351%||-0.525||0.00%|
|US2Y||US Treasury for two years||4.155%||-0.433||0.00%|
|US10Y||US Treasury for 10 years||3.464%||-0.231||0.00%|
|US30Y||US Treasury for 30 years||3.563%||-0.137||0.00%|
Meanwhile, gold prices hit their highest since early February at $1,893.96. US gold futures rose 1.2% to $1,889.40, while SPDR Gold Trust rose 1.5% in the primary market. Investors tend to roll into the metal during financial shocks. Moreover, lower interest rates reduce the opportunity cost of holding zero-yield gold.
Investors sought safety as banking regulators scrambled to back depositors with funds at Silicon Valley Bank and the now tattered Signature Bank, in an effort to ease fears of systemic contagion. Depositors at both failed institutions will have full access to their deposits as part of multiple moves approved by officials over the weekend.
“Anxiety about what could be the ‘next shoe to fall’ in the markets is spreading like wildfire,” said John Stoltzfus, chief investment strategist at Oppenheimer Asset Management. “We still think that while we are not out of the woods yet.”
Stock futures initially opened higher on Sunday evening based on the government’s plans, but have since reversed.
Concerns about the health of smaller regional banks deepened after regulators shut down a second institution on Sunday. First Republic Bank led banking stocks lower on Monday after saying on Sunday that it had received additional liquidity from the Federal Reserve and JPMorgan Chase.
Shares of First Republic in San Francisco lost 70% in premarket trading Monday after dropping 33% last week. PacWest Bancorp fell 37%, and Western Alliance Bancorp lost 29% in the primary market. Zions Bancorporation fell 11%, while KeyCorp fell 10%.
The SVB collapse was the largest banking failure in the US since the 2008 financial crisis – and the second largest bank failure ever. HSBC on Monday announced a deal to buy the British subsidiary of the failed US tech startup lender, after talks that lasted all night.
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