U.S. Treasury Secretary Reassured Support for Uninsured Bank Deposits to Stop Contagion

Barry Adams
21 Mar, 2023
New York City

Benchmark indexes advanced for the second day this week after investors bid up regional banks following comments from the U.S. Treasury Secretary. 

Secretary Janet Yellen showed the government's willingness to extend financial guarantee to uninsured deposits at all regional banks "if needed."

The supportive comments lifted stocks of battered down mid-sized banks. 

A third of all U.S. lending to businesses and consumers is provided by about 75 mid-sized banks with assets between $50 billion and $200 billion. 

Investors are increasingly focused on the health of the U.S. banking system after the sudden collapse of Silicon Valley Bank and the $30 billion deposit infusion in the First Republic Bank. 

Customers with uninsured deposits with balances larger than $250,000 may move deposits to larger banks in the event of a panic, leading to wider bank runs. 

Investors also reviewed the latest data on home sales and the sharp rebound in European markets. 

 

Existing Home Sales Advanced in February

Existing home sales increased in February, halting declines for the 12-months in a row, the National Association of Realtors said Tuesday. 

Existing home sales, which includes single and multi-family units, increased 14.5% in February from the previous month, but declined 22.6% from a year ago. 

Monthly increase in annual pace was the largest increase following 22.4% rise in July 2020. 

The median existing-home sales price eased 0.2% from the previous year to $363,000 and  the inventory of unsold existing homes was unchanged from the previous month at 980,000 at the end of February, equivalent to 2.6 months' supply at the current monthly sales pace.

"Inventory levels are still at historic lows," Yun added. "Consequently, multiple offers are returning on a good number of properties."

First-time buyers accounted for 27% of all sales in February, down from 31% in January and 29% a year ago, and Individual investors or second-home buyers purchased 18% of homes in February, up from 16% in January but down from 19% a year ago. 

Individual investors make up for the bulk of the purchase.  

 

Indexes & Yields 

The S&P 500 index increased 0.7% to 3,978.13 and the Nasdaq Composite index advanced 0.6% to 11,750.69. 

The yield on 2-year Treasury notes increased 20 basis points to 4.13%, 10-year Treasury notes inched up 8 basis points to 3.53% and 30-year Treasury bonds advanced 4 basis points to 3.75%. 

Crude oil futures price for immediate month delivery increased 56 cents to $68.35 a barrel and natural gas price declined 6 cents to $2.15 a thermal unit. 

 

U.S. Stock Movers 

Regional banks led the gainers after beaten down banks advanced following comments from the U.S. Treasury Secretary Janet Yellen.

First Republic Bank soared 34.6% to 11,750.69, KeyCorp increased 6.0% to $12.35 and PacWest Bancorporation jumped 15.6% to $11.93. 

UBS Group AG soared 9.1% to $20.48 a day after the largest Swiss jumped 3% following the forced takeover of Credit Suisse engineered by the Swiss government and the Swiss National Bank. 

Credit Suisse Group AG increased 1% to 96 cents in New York and jumped 5% to 4.7% to 86 Swiss cents.  

Foot Locker Inc increased 6.1% to $42.28 a day after the specialty athletic retailer posted better-than-expected same store sales. 

The retailer is also increasing its focus on selling online and plans to offer a deeper selection for younger children and kids. 

Tesla Inc increased 4.1% to $12.35 after Moody's lifted the electric vehicle makers' bond rating from speculative or "junk bond" to Baa3. 

The Baa3 is the lowest tier in the 10-tier investment grade rating system.