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Market Crisis Scorecard: Lessons Learned from a Manic March

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(This April Story corrected to fix Mahmood’s first name spelling instead of Mahmoud, in verse 4)

By Naomi Rovnick, Yoruk Bahceli and Dhara Ranasinghe

LONDON (Reuters) – Calm returns as markets roiled by March’s banking havoc , it is time to rethink policy responses. The IMF warns of a “dangerous mix of vulnerabilities” in markets. The BIS said for the first time since World War II that central banks were responding to soaring inflation coinciding with very high debt levels, threatening economic stability.

“Risks to the financial system are less urgent than they were in March, but that doesn’t mean the crisis is over,” 4002008 Northern Trust

(NASDAQ: 1000 NTRS

) Chief Economics J. Carl Tannenbaum, who worked in the Fed risk department during

global economic crisis.

Here, experts weigh in on what policymakers did well in March, and what it says for the future. 200

Central Bank’s Dilemma https://inew.news/wp-content/uploads/2023/04/localimages/Screenshot-25100—25exist-25100.10..png 100

1 / Stick to the plan

With the collapse of Silicon Valley Bank (SVB) and the collapse of Credit Suisse (CS), the Fed and the European Central Bank are Continuing to raise interest rates in March was forced to merge with UBS. Interest rates are rising rapidly after years of pain caused by ultra-low rates. But changing course as the market slides could exacerbate the situation.

“If they don’t raise rates, there’s a chance people will look at this and say, oh my god, it’s worse than we thought It’s going to be bad,” said Dario Perkins, managing director of global macro at TS Lombard and former adviser to the U.K. Treasury.

A measure of volatility in the U.S. treasury market has been hitting since eased after highest levels since March.

Low and stable inflation is good for the market and the economy, Tannenbaum added, so central banks must show that they care about inflation. 200

US Bond Volatility https://www.reuters.com/graphics/USA-BONDS/akveqxzrqvr/Screenshot%400–%exist%50.16..pn g 97

2/ Loud and clear

Persist in the course and sell news up.

The Fed just had a meeting SVB failed and the days after ECB March The meeting was two days before Credit Suisse came to the rescue. Bank stocks in the United States plummeted 18% March.

Central bank softens interest rate hikes amid communications citing instability risks, Perkins says, showing reassuring “humility” .

Not all communication is good. The Swiss National Bank said in March Credit Suisse Meets Capital and liquidity requirements.

“Then a few days later, Credit Suisse disappeared,” said Gael Combes, head of fundamental research at Swiss fund manager Unigestion.

Combes said the reversal highlighted the prospect of central bankers being “at a disadvantage”. U.S. banks face borrowers defaulting on cars, loans and student debt, while U.K. mortgage borrowers will The switch from cheap fixed-rate loans to more expensive deals could trigger defaults. He said the “tentacles” of bank failures were “much longer than people think”. 3/ Painful

this21 The crisis has prompted a global effort to block taxpayer bailouts for struggling banks.

Credit Suisse’s bailout has caused pain elsewhere as Swiss regulators rule that holders of the bank’s extra tier-one bonds will Get wiped out, the bond acts as a shock absorber against losses. Shareholders received $3.3 billion.

Former ECB Chief Economist Peter Praet said the success of the CS bailout was reflected in the fact that the turmoil did not spread to other banks and that creditors were It is “very rare” for systemic institutions to largely bear the cost.

But lenders are unsure whether to hold AT1, putting at risk the idea of ​​a shock-absorbing capital buffer.

“The Bank Resolution Framework Established After the Great Financial Crisis,” Francesco S. “It’s proving difficult to implement,” Papadia said. 1000

Cocoa Crisis https://inew.news/wp-content/uploads/2023/04/localimages/chart.png6447bb0acf04f.png 100

4/ Unity After CITIC bailed out the market, the Fed and other major central banks passed the US dollar swap line Support market liquidity. Keep the global reserve currency flowing, which is since 2008 Experts say the coronavirus pandemic may have averted concerns that international institutions would sell U.S. Treasuries for dollars or that foreign central banks would not be able to deliver dollars.

“It comforts the market,” said Mahmood Pradhan, global head of macro at the Amundi Institute and former deputy director of the IMF’s European Department. “There is usually no need to expand the number of facilities, but this is a safety measure,” he said. 200

Hike Race https://inew.news/wp-content/uploads/2023/04/localimages/chart.png6447bb0cb6d50.png 400 5/ Moral Hazard

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