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Broad Based Bank Share Selling Underpins Tsys

US TSYS
Front month Tsys futures extending session highs for the third time since the open as broad based selling in domestic and foreign bank stocks returns despite moves to backstop (FRC, CS) over the last couple days.
  • Top underperformers at the moment: FRC -20.7%, CMA -7.1%, KEY -6.5%, TFC -5.7%, PNC -5.45%. Financials sector -3.03%, weighing on SPX eminis: at 3950 -44.5, still above first support of 3839.25, March 13 low.
  • Short end outperforming (TUM3 taps 103-19 high +12.12, 2Y yield 3.9354% low), yield curves bull steepening off deeper inverted levels, 2s10s tapped -54.877 high recently vs. -66.886 overnight low.
  • As has been the case since Silicone Valley Bank and Signature Bank collapse, short end rates are back to pricing in looser policy expectations, implied pricing of rate cuts moving back toward midyear again.
  • Fed funds implied hike for Mar'23 at 16.6bp (-2.4bp from this morning), May'23 cumulative 26.5bp (-8.6bp) to 4.837%, Jun'23 11.2bp (-13.2bp) to 4.689%.
  • Implied cut for Jul'23 at -15.2bp to 4.423%, Sep'23 cumulative of -35.3 to 4.224%; peak Fed terminal rate has fallen to 4.83% for May'23 vs. 4.920% earlier.
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