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Hello, plumber?
Aurelie Barthere
Key Takeaways
9 min read
  • The macro data say that the US labor market is cooling (tech layoffs starting to show in the data) but labor supply-demand imbalances are still historically high
  • Financial markets remain unsettled following three bank failures in seven days, and despite the announcement of a 25bn-short-term-lending facility by the FDIC
  • Monetary policy: A +25bps hike at the Fed March meeting now seems more probable, unless the US February CPI released tomorrow surprises significantly to the upside
  • Last week’s bank shutdowns are expected to lead:
  • Banks to tighten lending standards further, which should weigh on the US economy, and on inflation with a lag
  • Investors to become more risk-averse and recessionary trades to start being bid
  • In crypto, some stablecoin diversification out of USDC has started and will continue until we get regulatory clarity on stablecoins vs CBDCs
  • We also expect more cautionary flows from crypto to Tbills (it has already started)

1,2,3 bank failures: quick recap of what happened

Lot of good analyses have dissected what happened to the three tech and VC-friendly banks, Silvergate Bank (SI), Silicon Valley Bank (SIVB), and Signature Bank (SBNY) that were successively shut down by the banking authorities in the past seven days.

A summary would read: some of the consequences of 14 years of Fed fund rates standing below 2.5% (and during many of these years close to zero) have been poor risk management in the least-regulated areas of finance and investment, combined with unrealized asset value growing increasingly at-odds with fundamental value.

The [jump from 0% to 4.5-4.75% in the US Federal fund...