foreign exchange

The dollar fell and the bankruptcy of Silicon Valley banks triggered a decline in market expectations for the Federal Reserve to raise interest rates

The expectation that the Federal Reserve may suspend or cut interest rate hikes to curb inflation fell on Monday because the U.S. authorities took action to limit the impact of the sudden bankruptcy of Silicon Valley banks.

President Biden said that the government took prompt action on Sunday to ensure that depositors can access their funds in Silicon Valley Bank and signature bank, which should make Americans believe that the U.S. banking system is safe.

On Sunday, the Federal Reserve announced that it would provide additional funds through the new bank maturity fund plan, which would provide one-year loans to depository institutions, supported by treasury bonds and other assets held by these institutions.

futures

The disaster of Silicon Valley Bank stimulates the demand for hedging; Gold and silver prices soared

The collapse of Silicon Valley banks triggered investors' concerns. The prices of gold and silver soared on Monday, attracting investors because of their risk aversion properties. At the same time, it raised the hope that the Federal Reserve might have to stop its active monetary policy.

The global stock market fell. Despite the efforts of regulators to control the turbulence of Silicon Valley Bank and signature bank, the US dollar and treasury bond yields continued to fall.

The spot price of gold rose 2.01% to US $1905.59 per ounce, the highest level since early February. US gold futures rose 2.34% to US $1911.00 per ounce.

Oil prices fell in volatile trading as bank concerns shook the market

On Monday, with the collapse of Silicon Valley banks destabilizing the stock market and triggering concerns about a new round of financial crisis, oil prices fell by nearly 2% in volatile trading, but the recovery of Chinese demand provided support.

As of 1:14 p.m. EST (GMT 1714), Brent crude oil futures fell $1.51, or 1.8%, to $81.27 a barrel. Previously, the global benchmark price fell to an intraday low of US $78.34 per barrel, the lowest price since early January.

West Texas Intermediate crude oil futures fell $1.40, or 1.8%, to $75.28 a barrel. WTI futures prices had fallen to $72.30 a barrel, the lowest since December last year.

shares

The S&P 500 rose in volatile trading as the US bailed out bank deposits in Silicon Valley

S&p 500 rose slightly in Monday's trading. Traders are evaluating plans to support all failed Silicon Valley bank depositors and provide additional funds for other banks. Some people bet that this kind of financial shock may cause the Federal Reserve to suspend raising interest rates.

After a fall of 1.4%, the broad index rose 0.3%. The Nasdaq composite index rose nearly 1%. The Dow Jones industrial average rose 67 points after falling 284 points in early trading.

The Chicago Board Options Exchange Volatility Index, the preferred fear indicator for U.S. stocks, has reached a level not seen since the end of 2022, and is close to what is considered to be a very high risk area. It recently rose about 2 points to 26.56.

The yield of two-year Treasury bonds fell the most in three days since the stock market crash in 1987

After the collapse of Silicon Valley banks, the government guaranteed the banking system, and investors flocked to buy U.S. government bonds on Monday. This boom led to a sharp fall in US Treasury yields.

The yield of the two-year US Treasury note was the latest 4.06%, down 53 basis points.

One basis point equals 0.01%, and the price is inversely proportional to the yield.

Since Wednesday, the yield of US Treasury bonds has fallen by 100 basis points, or a full percentage point, the largest three-day decline since October 22nd, 1987, when the yield of US Treasury bonds fell by 117 basis points. This move came after the stock market crash on October 19th, 1987, which was called "Black Monday". At that time, the S&P 500 index plummeted by 20%, the largest decline in a single day. This decline was larger than the 63 basis points decline in the two-year yield three days after the September 11 attacks.

The yield on the 10-year Treasury note fell nearly 20 basis points to 3.498%.

Investment bank view

Scotiabank: usd/cad: may have a chance to rebound to 1.37

"The price trend on Friday strongly indicates that the upward trend of the US dollar in the past month or so may be stalling. However, the rally of the US dollar from its low point in the day seems very constructive on the short-term chart, while the basic trend momentum remains bullish."

"If the US dollar/Canadian dollar is suppressed near 1.38, the Canadian dollar may have a chance to recover to 1.37."

"The continued strength of the US dollar may trigger a retest of 1.3850/60."