- Investors are watching key parts of the market for short-term dollar borrowing to determine if and how signs of systemic stress might be emerging.
- The new Bank Term Funding Program allows banks to monetize their underwater hold-to-maturity portfolios without creating losses.
- The Federal Home Loan Banks provide funding to commercial banks and other members via so-called advances, which tend to be short-term loans secured by mortgages or other assets.
- Bank reserve levels are declining as the Fed raises interest rates and engages in balance-sheet reduction, which could exacerbate bank funding pressures.
- The backdrop of major market turmoil has fueled a huge tightening of financial conditions, which feeds back into the real economy and is a major factor driving the repricing of Fed expectations.
Bloomberg — Markets — Money markets and systemic bank stress — Banking — Financial conditions — Federal Reserve
What to Watch in Money Markets for Signs of Systemic Bank Stress
Investors are watching the market for signs of systemic bank stress after the collapse of Silicon Valley Bank. New backstops and funding sources, along with declining bank reserves, could exacerbate funding pressures. Financial conditions are tightening and driving the repricing of Fed expectations.