Fed Announces Emergency Loan Program To Stop Bank Run Contagion

Fed Announces Emergency Loan Program To Stop Bank Run Contagion

Breaking news. The Federal reserve has just released a brand new program to ease the contagion risk of Silicon Valley Bank.
What does this mean? The Fed is worried that we're gonna continue the bank runs. To stop this, what they have done is they've created a new program, which will allow banks and other lenders to be able to pledge treasury and mortgage backed securities for cash.
What this will do will eliminate any risk or any stress for those banks and lenders to have to sell their securities quickly for loss.
That's what happened to Silicon Valley Bank.
They had people pulling their money out.
They had roughly fifty percent of their assets pledged to treasuries. And as the treasury yield went up, their bonds became worth less.
Causing them to when they sold them to sell them all for losses.
So this program is designed by the Fed to stop other banks from having the same problem. That shows me that the Fed is very worried.
So with this coming up and additional major financial news this week from the consumer price
index, coming out on Tuesday. The producers price index coming out on Wednesday and job numbers coming out again on Thursday, it's gonna be a very interesting
week for the bond market. Stay tuned.

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