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Global banking panic effect: ADRs and bonds sank to 7.1%; S&P Merval fell 4.7%

Global banking panic effect: ADRs and bonds sank to 7.1%;  S&P Merval fell 4.7%

With a very high aversion to risk assets, due to the repercussions that the bankruptcy of the SVB could have on the financial system, the stress indicators of the financial markets moved with strong volatility this Monday, causing investors to rethink the outlook for US interest rates, triggering the biggest bond rush since at least 2008.

Learn more – Follow the price of the blue, official, CCL and MEP dollar in Argentina

Startup-focused bank SVB last week became the largest entity to fail since the 2008 financial crisis, sending shock waves through world markets. For this reason, the US president, Joe Biden, came out to bring peace of mind to the markets: he said that will pledge to do whatever is necessary in the face of the banking crisis, whose bankruptcy of SVB forced regulators to intervene with emergency measures.

The announcement that the Fed and the US Treasury made jointly over the weekend, when they had promised that SVB depositors would have access to all of their deposits, (without the protection of shareholders and certain bondholders) had not been enough. .

Under this scenario, bonds denominated in dollars registered falls of up to more than 7% in the Buenos Aires stock market: the Global 2038 collapsed 7.1%, the Global 2046, 3.7%, and the Bonar 2041, 1.8%. In New York, Argentine titles fell to 5.2% (Bonar 2029).

Indeed, The Argentine country risk measured by the JP Morgan bank climbed 1.8% to 2,322 basis points, after reaching 2,444 units at the market opening, a level not seen since last November.

“The collapse of the banks Silvergate Capital (crypto bank) and Silicon Valley Bank hit risk assets, of which the Globals are a part”, pointed out from StoneX.

After the US authorities intervened to limit the consequences of the sudden bankruptcy of Silicon Valley Bank, Expectations that the Federal Reserve will be aggressive with monetary policy to curb inflation sank on Monday in the market. In fact, Goldman Sachs said it no longer expects the Federal Reserve to raise rates at its meeting next week.

“The potential change of direction of the Fed in monetary policy could imply a slight recovery for Argentine bonds”, estimated Personal Investment Portfolio (PPI). “On the one hand, a decrease in the tightening of the interest rate could cause investors, in search of higher yield, to include riskier securities in their portfolios -of high ‘beta’- like the Argentine ones,” added.

“For now it was not the end of the financial system, nor a new 2008. In fact, I see many more green than expected. And that they made a decision that does not leave anyone happy, because they rescued depositors not covered by insurance but not to the bank, its shareholders and creditors”, evaluated the economist from the consultancy Ledesma, Gabriel Caamaño.

Towards the close of financial activity, where the stock market cut its operations by 60 minutes to accommodate Wall Street, The IMF announced the revision to the new reserve goals for the country in the face of the worst drought in many years, which will allow the disbursement of some 5.3 billion dollars. At the same time, the Government promised not to use the reserves to buy dollar bonds (ie intervene in financial exchange rates).

S&P Merval and ADRs

Meanwhile, in the equity segment, BYMA’s leading S&P Merval index sank 4.7% to 225,227.52, after falling 3.8% last week.

The global collapse also conditioned the performance of the papers of Argentine companies, which closed with falls of up to 7.1%. Among the steepest declines of the day, stood out YPF (-7%); Take off (-5.4%); BBVA bank (-5%); IRSA (-4.9%); Transportadora Gas del Sur (-4.3%); and Vista (-3.8%).

Global financial uncertainty opens a new storm front for the Argentine economy as fears of a retraction that will affect the country’s already weak exports will intensify.

On Wall Street, it was a very volatile day. After falling to almost 2%, Wall Street ended unevenly, but resisted the fear caused by bank failures in recent days in the United States, while European stock markets closed with sharp falls due to fears of contagion in the sector. The Dow Jones lost 0.3%, the Nasdaq gained 0.5% and the S&P 500 lost 0.2%.

Wall Street opened in red due to the crisis hitting the US banking sector, to the point of leading the authorities to guarantee all customer deposits on Sunday. But then the world’s largest stock market recovered ground and ended up mixed and fairly close to equilibrium, thanks in part to “to sectors sensitive to interest rates, which rose due to the fall in the yields of the obligations” of the Treasuryexplained Edward Moya of Oanda in an analysis note.

“The ones that continue to go through the storm are the regional banks, where depositors rush to withdraw their deposits (today the IAT etf lost 15%),” they commented from SBS. On the other hand, the 2-year US bond rate fell 60 basis points to 3.99%, while the 10-year rate fell 15 bp to 3.55%.

Source: Ambito

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