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First Republic Woes Likely Aiding US Treasury Bid

CROSS ASSET

In the cross asset space, much of the focus rests on lower US cash Tsy yields, with the 2yr yield back to 4.12/13%, -3/4bps off NY closing levels. Lower yields are evident across the rest of the curve as well. Reports that US bank First Republic may need government support to encourage buyers for the troubled bank is likely helping the bid in US Treasuries.

  • Note eminis are essentially sitting around flat. Shares of First Republic slumped in extended US trade late Tuesday, but pared losses to finish down 9%.
  • The pull back in yields is weighing on the USD modestly, although USD/JPY is still firmer (last near 132.70). The BBDXY is off 0.05%, with the AUD up around 0.30% to 0.6685/90. Firmer regional equities, led by HK gains, are aiding sentiment, particularly against the yen.
  • Looking ahead, First Republic and the banking sector are likely to remain a focus point for the next few sessions. Major US bank chief executives are in Washington Tuesday-Wednesday this week (see this link). The Senate US banking committee will also hear from US Fed and FDIC officials on Wednesday on the issue of recent banking collapses (see this link). This comes ahead of next week's probe into the SVB collapse (see this link).
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