Banking Crisis 2023

JPMorgan's move to acquire First Republic and its muni portfolio eases the risk of nearly $20 billion of munis flooding the market.

First Republic Bank was shuttered by regulators early Monday, and all its deposits and most of its assets were acquired by JPMorgan. San Francisco-based First Republic was undone by low-rate mortgages it made to its wealthy customers as well as by the fallout from last month's banking crisis.

The $7 billion portfolio consists of highly rated, lower-coupon muni debt. It is unlikely to be a single auction and the firm is currently circulating the list on the Street to gauge interest.

The decrease in long-term interest rates this year has helped banks' bond portfolios recover a bit. Some of them may consider restructuring their securities portfolios in the short run, and longer-term changes are also possible as the fallout from last month's crisis continues.

Municipals' strong fundamentals and high credit quality combined with market inefficiencies and dislocations present opportunities.

Yields on top-rated municipal bonds fell as much as nine basis points on Friday as bank contagion fears resurfaced and investors looked to safe-haven securities. The primary calendar is rebounding, with volume rising to an estimated $5.4 billion in the week ahead.

Municipals should continue to be part of banks' high-quality portfolio of assets, but some think ownership may be curtailed by the banking collapse.

"Florida will not side with economic central planners; we will not adopt policies that threaten personal economic freedom and security," said Gov. Ron DeSantis.

The reverberations from the Silicon Valley Bank and Signature Bank failures make the outcome of this week's Federal Open Market Committee meeting unpredictable.

Governments across the Northeast announced support for emerging industries affected by the collapse of Silicon Valley Bank and Signature Bank.

Former Treasury Secretary Lawrence Summers said the Federal Reserve shouldn't be spooked into easing its campaign to contain inflation out of excessive concern about a credit crunch in the wake of the recent banking turmoil.

The collapse of Silicon Valley Bank and Signature Bank clouds the economic landscape and complicates monetary policy decisions but it's a long way off from the troubles banks and broker-dealers faced in the 2008 financial crisis.

Is the banking sector in crisis? What happened, and what can bankers learn from this turmoil? Two of American Banker's reporters discuss the fallout and what comes next with the magazine's editor-in-chief.

Outflows continued as Refinitiv Lipper reported $461.123 million was pulled from municipal bond mutual funds in the week that ended Wednesday after $307.815 million of outflows the week prior.

"What is happening at Silicon Valley Bank is on everyone's mind," UCLA Anderson Forecast Director Jerry Nickelsburg said at its quarterly economic update.

The collapse of Silicon Valley Bank and Signature Bank won't impact the Fed or the market enough to cause rates to drop and refunding volume to significantly increase, according to muni experts.

Navigating challenges and what's ahead in banking regulation.

"The main question for investors recently has been: will we see bank selling of municipals that exerts pressure on the market, and what kind of market effects could occur," Barclays strategists said.

The fall of Silicon Valley Bank is forcing regulators to take a closer look at asset structure and the integrity of depository institutions, which will likely include the issuers of securities.

"The muni market is no different than others, where fear and greed drive the trends," said Peter Delahunt, StoneX's managing director.