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Late Equities Roundup: FHLB Lending Drop Not Reason for Bank Bounce

US STOCKS
  • US stocks climbing off early session lows in early afternoon trade: Dow Industrials (33,540.58 +55.20) outperforming SPX Eminis (4131.5 -0.50) and Nasdaq (12,077.73 -10.23) at the moment.
  • Potentially buoying stocks earlier, Bloomberg story cited FHLB data that showed a drop in lending to $37B in last week of March from $304B prior as "an early sign that the banking crisis has started to subside."
  • While Financials sector lead by banks did bounce off morning lows, the FHLB data likely not the reason one analyst said "When emergencies hit, issuance soars, almost all of it is short and has to be rolled over," he explained. "As demand ebbs, FHLB lengthens its maturities and reduces reliance on constant roll-over. So, issuance NATURALLY declines after a sudden burst of unexpected demand."
  • Additionally, "individual HL banks borrow more than they actually need to fund loans to members so they don't have to rely on the market every day. So, maturities fall and surplus funding reduces .. and issuance declines."
  • Lastly, a drop in lending as a sign of cooling bank stress "goes against the takeaways from the borrowing data in last week's H.8 report."
  • Industrials and Energy sectors continue to outperform while Communication Services and Information Technology sectors lag (Google, META and Match all weaker).
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