SVB Financial Bonds Sin

11 mars 2023

SVB Financial Group's bonds plummeted to 31 cents on the dollar following the closure of its subsidiary, Silicon Valley Bank, which marked the biggest failure of a major US bank since 2008.

The BBB-rated 10-year bonds experienced heavy trading, causing them to lose ground after the California Department of Financial Protection and Innovation closed Silicon Valley Bank, putting the Federal Deposit Insurance Corp. in control of its assets.

Concerns over distress at Silicon Valley Bank and potential risks in the broader banking system have caused financial sector bonds to be broadly under pressure. The Invesco KBW Bank ETF has also experienced a decline in shares, with investors expressing concerns about potential cracks in the financial system.

The collapse of Silicon Valley Bank is viewed as an isolated event by Barclays analysts, but it still raises the risks of broader distress within the banking system, which could dampen talk of a Federal Reserve interest-rate hike in March.