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March 20 (Reuters) – Fears of a global banking crisis are continuing to swirl, with investors keeping a close eye on a dashboard of indicators that show how stress is rippling through markets and the banking system.

Many of these are continuing to flash warnings, though they have not surpassed levels seen during the COVID-19-fueled market turbulence of 2020. Despite a state-backed takeover of Credit Suisse by UBS AG, a wipeout of some Credit Suisse bondholders has added to concerns over broader bank capital.

Uncertainty around US banks remains high as well. Shares of embattled regional lender First Republic Bank were down 34% Monday afternoon following a downgrade by S&P Global and continuing worries over the bank’s liquidity despite a $30-billion rescue last week.

Here are some of the indicators investors are watching, and what they are showing:

• An indicator of credit-risk in the euro zone banking system, the so-called FRA-OIS spread, hit its highest levels since mid-July last week but has pulled back from those highs. But the spread, measuring the gap between the euro zone three-month forward rate agreement and the overnight index swap rate, is still relatively elevated at around -1 basis point in a sign of lingering concern about financial market stress.

• The cost of insuring exposure to European junk bonds rose to the highest since mid-November on Monday at over 516 basis points. This has risen over 130 basis points since March 7 as riskier assets have borne the brunt of bank turmoil on both sides of the Atlantic.

• Junk spreads – the premium investors demand to hold the riskier debt over US Treasuries – rose to 520 basis points last week, the highest since October last year, according to the ICE BofA US High Yield Index. Investment grade credit spreads, which indicate the premium investors demand to hold highly rated corporate bonds over safer US Treasuries – rose to 164 basis points last week, the highest since October, according to the ICE BofA US Corporate Index.

Meanwhile, last week’s wild swings in the Treasury market have whipsawed investors and contributed to unease. The ICE BofAML MOVE Index, a measure of expected volatility in US Treasuries, surged to its highest level since the financial crisis last week as troubles in the banking sector forced investors to pull back on their views of how aggressively the Federal Reserve will raise rates in coming months.

With little certainty on what signal the central bank will send on the future trajectory of monetary policy at the conclusion of its meeting on Tuesday and Wednesday, many believe volatility in Treasuries is unlikely to die down anytime soon.

(Reporting by Davide Barbuscia, Yoruk Bahceli, Dhara Ranasinghe and Amanda Cooper; Graphics by Vincent Flasseur; Editing by Ira Iosebashvili and Cynthia Osterman)

 

March 20 (Reuters) – Gold prices retreated from their highest level in a year in volatile trading on Monday, as share markets and Treasury yields bounced back on central banks’ efforts to shore up confidence in the financial sector.

Spot gold dipped 0.5% to USD 1,977.18 per ounce by 1:57 p.m. EDT (1757 GMT), after sliding over 1%, while US gold futures rose 0.5% to settle at USD 1,982.80.

Earlier in the session, prices of the yellow metal had climbed 1% to their highest since March 2022 at USD 2,009.59, just shy of a record set during the onset of the COVID-19 pandemic.

“While emergency efforts are being done… now you’re seeing that this is far from over. Safe-haven flows are fairly going to be the key trade,” Edward Moya, senior market analyst at OANDA, said.

In an effort to help the banking sector, top central banks moved on Sunday to bolster the flow of cash around the world.

Benchmark Treasury yields rose close to their session highs, while equities bounced back on the rescue of Credit Suisse which helped calm some jitters around a bigger banking crisis.

Gold prices have rallied more than USD 100 after the collapse of US-based Silicon Valley Bank earlier this month.

“Today’s rejection above USD 2,000 may trigger some profit-taking, but in our opinion not a change in direction,” Ole Hansen, head of commodity strategy at Saxo Bank, said in a note, adding he maintains a bullish outlook on gold.

Bullion is considered a safe-haven asset during financial uncertainty, and lower interest rates reduce the opportunity cost of holding the non-yielding bullion, making it more attractive.

A key US central bank policy announcement is due on Wednesday. Market participants are mixed on the Federal Reserve’s decision, while bets for a rate-hike pause have increased.

Spot silver fell 0.4% to USD 22.50 per ounce, platinum firmed 1.1% at USD 986.27, and palladium dipped 0.5% to USD 1,413.08.

(Reporting by Seher Dareen and Swati Verma in Bengaluru; Additional reporting by Bharat Govind Gautam; Editing by Shilpi Majumdar)

 

NEW YORK, March 20 (Reuters) – Oil prices rebounded and rose over 1% on Monday after diving to their lowest levels in 15 months as the market worried that risks in the global banking sector could spark a recession that would sap fuel demand.

In volatile trade, Brent crude futures for May rose 82 cents, or 1.1% to USD 73.79 a barrel. US West Texas Intermediate crude futures for April gained 90 cents, or 1.4%, at USD 67.64 on the eve of the contract’s expiry. The more actively traded May futures rose 89 cents, or 1.3%, at USD 67.82 a barrel.

Oil prices rebounded as Wall Street posted gains. Earlier, Brent and WTI fell about USD 3 a barrel to the lowest since December 2021, with WTI sinking below USD 65 a barrel at one point. Last week, both benchmarks shed more than 10% as the banking crisis deepened.

Oil’s early slide occurred despite an historic deal in which UBS, Switzerland’s largest bank, agreed to buy Credit Suisse (CSGN) in an attempt to rescue the country’s second-biggest bank.

After the deal was announced, the US Federal Reserve, European Central Bank and other major central banks pledged to enhance market liquidity and support other banks.

“There’s a lot of fear-based movement (in oil prices),” Price Futures Group analyst Phil Flynn said. “We’re not moving at all on supply and demand fundamentals, we’re just moving on the banking concerns.”

The S&P 500 and the Dow Jones gained, helping lift oil prices off session lows on bets the Fed will probably pause on rate hikes on Wednesday to ensure bank sector troubles do not snowball. Traders and economists remain split on whether the Fed will raise its benchmark policy rate.

Some executives are calling on the central bank to pause its monetary policy tightening but be ready to resume raising rates later.

“Volatility is likely to linger this week, with broader financial market concerns likely to remain at the forefront,” ING Bank analysts said in a note, adding the looming Fed decision adds to uncertainty in markets.

Meanwhile, Group of Seven Nations are not likely to revise a USD 60-per-barrel price cap on Russian oil this week, two European Union officials and one official from a coalition member told Reuters on Monday.

The G7 was due in mid-March to revise the price cap put in place in December, but the officials said EU countries’ ambassadors were told by the European Commission over the weekend there is no appetite among the G7 for an imminent review.

A ministerial committee of OPEC and producer allies including Russia, together known as OPEC+, is set for a meeting April 3. The group agreed in October to cut oil production targets by 2 million barrels per day until the end of 2023.

(Reporting by Stephanie Kelly in New York; additional reporting by Noah Browning in London, Florence Tan and Emily Chow in Singapore; Editing by Paul Simao, Chris Reese and David Gregorio)

 

LONDON, March 17 (Reuters) – Wild price swings in government bonds on a scale not seen in decades given banking sector turmoil have sparked concern about the smooth functioning of a market considered vital to the global financial system.

Trading in short-dated German bond futures was briefly interrupted due to volatility after Thursday’s European Central Bank’s rates decision and on Wednesday CME Group briefly halted trade in some US interest rate futures.

Separately, two days of chaos in China’s USD 21 trillion bond market ended on Friday after Beijing allowed money brokers to resume providing data to third-party platforms.

Extreme intraday price swings in government bonds, used as benchmarks for the pricing of a host of other assets, is another headache for officials navigating banking sector turmoil that has drawn parallels with the 2008 global financial crisis.

Jeffrey Gundlach, CEO of DoubleLine Capital, said he considered selling Treasuries earlier in the week, but the market was “wildly illiquid.”

“The strangest bond day ever was Tuesday this week where if you took your eyes off the Treasury market screen for one minute …When you looked back at the screen the price could be a point different on 10 years, 30 years (bonds),” he said.

Euro zone benchmark bond issuer Germany’s two-year bond futures have been exceptionally volatile. On March 15, when the extent of Credit Suisse’s problems started to become apparent, the front-month futures contract saw its biggest swing between intraday highs and lows on record, according to Refinitiv data.

Two-year US and German bond yields fell over 50 basis points (bps) each on Wednesday, the biggest daily moves in at least 28 years, before rising sharply the next day.

“We have seen the biggest swings in decades, that is the point of comparison,” said Nordea chief analyst Jan von Gerich.

“Across markets it’s not the same volatility as it was during the global financial crisis, but in the bond markets these are big swings and that tells me everything is not okay.”

In China meanwhile, investors grappled with a different kind of chaos.

Regulators had on Wednesday barred brokers from providing data feeds, citing data security. Turnover in the interbank bond market tumbled 9% on Wednesday and another 16% on Thursday as traders had trouble accessing price information with many turning messaging groups to trade.

LIQUIDITY

Liquidity, the ease of buying and selling an asset, has been challenging this week.

The heads of government bond trading at two European banks said bid-offer spreads, which represent transaction costs for traders, remained wider than usual on Friday.

One said he expected liquidity would remain poor for a while.

Daniel Ivascyn, chief investment officer at PIMCO, said bond market conditions this week were not as bad as during the 2020 COVID crisis, but noted that liquidity in the USD 22 trillion US Treasury market was “challenging”, even relative to the last couple of years.

A measure of implied volatility in the Treasury market meanwhile rose this week to its highest level since 2008.

KEEPING WATCH

The heightened volatility has caught the eye of officials who play a role in ensuring financial markets stability.

A Dutch finance ministry spokesperson told Reuters on Friday the Treasury was keeping a close eye on bond markets, adding it did not expect to make any changes to its issuance plans for the year which are already more flexible than usual.

“Of course, we will continue to closely monitor the developments in the markets. Where necessary we can adapt our plans,” the person said.

On Thursday, Germany’s debt agency said its bond market was functioning well, but auctions could be affected by the volatility, while UK debt agency chief on Wednesday described global markets as “pretty stressed and volatile.”

Analysts noted that bond volatility was exceptionally high not only because of a flight to safe-haven government debt, but also due to a massive repricing of rate-hike expectations.

“Safe-haven bonds on which other assets are priced need stable valuations,” said Nordea’s Gerich. “If liquidity is deteriorating due to wild swings in safe-haven markets, that has implications for the functioning of financial markets and broader economic stability.”

(Reporting by Dhara Ranasinghe in London,Yoruk Bahceli in Amsterdam and Davide Barbuscia in New York, additional reporting by Amanda Cooper in London; Editing by Raissa Kasolowsky)

 

March 17 (Reuters) – Gold prices surged more than 2% on Friday as a wave of banking crises shook global markets and put bullion on track for its biggest weekly rise in three years, while bets solidified for a less aggressive Federal Reserve in its fight against inflation.

Spot gold climbed 2.8% to USD 1,971.95 per ounce by 1:47 p.m. ET (1747 GMT), highest since April 2022. Bullion has added about 5.6% this week, the most since March 2020.

US gold futures gained 2.6% to settle at USD 1,973.50.

“Gold is surging on fears that more bad banking news could appear over the weekend and hopes that the Fed will pause its rate hikes next week,” said Tai Wong, an independent metals trader based in New York.

The collapse of Silicon Valley Bank in the US has highlighted banks’ vulnerabilities to sharply higher rates, while a rout in Credit Suisse CSGN.S shares has added to the market turmoil.

“Gold is likely to shine through the chaos as investors adopt a guarded stance,” said Lukman Otunuga, senior research analyst at FXTM.

The dollar and stock markets slid, making bullion a more attractive investment. While it is considered a hedge against economic uncertainties, gold’s opportunity cost rises when interest rates are increased.

The Fed will raise interest rates by 25 basis points on March 22 despite the recent banking sector turmoil, according to a majority of economists polled by Reuters.

Silver was set for the biggest weekly percentage rise among the four precious metals. It advanced 3.1% to USD 22.38 per ounce on Friday.

Platinum firmed 0.1% to USD 974.21, while palladium dropped 2% to USD 1,401.63.

“The sudden tightening in financial conditions won’t help palladium, whose usage is largely industrial though it is technically in the precious complex,” Wong said, adding that platinum “has just been a chronic underperformer and is struggling to shake its reputation”.

(Reporting by Bharat Govind Gautam and Seher Dareen in Bengaluru; Editing by Matthew Lewis and Shounak Dasgupta)