Markets
Treasuries rallied yesterday, dragging yields 4.1 to 7.3 bps lower with the front end of the curve outperforming. Safe haven flows flocked into US bonds on reports of two regional banks (Zions & Western Alliance) saying they were the victim of collateral-related fraud on loans to funds that invest in distressed commercial mortgages. Both banks fell more than 10%, dragging the broader regional bank index significantly lower too. This index got to the center of attention back in March 2023, when other regional lenders including Silicon Valley Bank failed and caused tremors across other markets. The current matter is different from the underlying issues back then (Treasuries deeply under water due to the Fed’s tightening cycle) and it remains to be seen if this is an isolated, one-off event. Being in a late cycle economy, however, it does trigger investor concerns of wider spread cracks emerging in the credit market. The…
