Mohammed Apabhai, head of Asia trading strategy at Citigroup Global Markets, discusses the SVB meltdown, Federal Reserve policy and his outlook for markets. He speaks on Bloomberg Television.
——–
Follow Bloomberg for business news & analysis, up-to-the-minute market data, features, profiles and more: http://www.bloomberg.com
Connect with us on…
Twitter: https://twitter.com/business
Facebook: https://www.facebook.com/bloombergbusiness
Instagram: https://www.instagram.com/bloombergbusiness/
Transcript
All your primary take away from this. You know, when you CAC the news, what were your immediate thinking, thinking along the lines, implications of it? Well, I think the first thing that we were thinking about was that there was this divergence in the way that rate markets, bond markets and inflation
Markets were pricing. We’re quite concerned about risk at the beginning of the month. And if you look at equity markets, credit markets and equity volatility markets, they were completely complacent. Equity investors and credit investors just did not want to listen. But about this idea that there was some
Risk out there and the first thought was this is the catalyst that is going to get risk to reprice. And I think that that is what is going to happen. I think that’s going to be notwithstanding what is happening with the deposit insurance today.
I think the bigger implication of this is that no longer can we rely on this idea that nominal GDP is going to make sure that, you know, credit markets are fine. And the Fed backstop, we know with the Fed marking to maturity doesn’t mean that everybody else is OK when they have
To mark to market. So I think it’s going to be a reevaluation of the risks that are involved. Does it stop the Fed from hiking all the way? In my view, no. OK. The reason why is because we’ve been doing a lot of work, as you might
Imagine, about whether there is any systemic risk that there is coming through here. It doesn’t really seem like it is. If you look at whether there are a few banks that are the markets are concerned about. We think we’ve got a handle or a good
Way of actually measuring it. It’s called the EVP framework and it seems to worked quite well in the last 48 market hours in terms of identifying the vulnerable institutions. But the bigger ones there, they’re all solid, at least for now. How long do you think? I mean, the markets are, as you
Mentioned, somewhat relieved. Take a look what’s been going on in the short end of the curve in Treasury market. The dollar is retreating as well. I mean, how long you think this kind of goodwill is going to last then? I’m actually quite surprised at the way
The market is behaving this morning. On Thursday and Friday, we had the bad news coming in that was negative for the dollar. That was bullish for rates. And now we’ve had this good news that’s come in and the dollar is continuing to fall and rates are continuing to rally.
So at this moment, I would actually be bearish rates, bearish bonds, I’d be bearish equities, bearish credit, bullish dollar and bullish volatility. Yeah, absolutely. You know, we just had that chart about liquidity result really being that apparent. But, you know, the thing is, as Kutty goes on, we’ve got
Suppose the reserves needed for we’ve got also at the same time deposits. Likewise. But over the past year, separately, the banks have been increasing their borrowing. If there’s so much excess liquidity, I might need. I don’t think there is a need. I think what they mean by that.
Well, I think the thing is that the debate around in the market has all been focused around what is going on with interest rates. But actually, you know, the the thought that we had all the time was that the way that this economy is being restructured in the low interest rate
Environment actually means that when you raise interest rates for some people, it actually increases the money supply rather than decreasing it for them. Right. So the way that you want to be controlling inflation is actually by speeding up Kutty, but that’s a debate
That nobody is really having. Now, one other thing that is quite interesting is that even though we’ve had this Fed action that’s come in this morning, there’s a measure in Bloomberg you can type it up right now. It’s called CGI US K RTS. It’s called the key rate.
Key rate because it’s so important. And despite the Fed action, this has actually been going up today. So it’s gone from green where it was last week to now it’s flashing amber and the markets are just shrugging that off. And it’s a real surprise. But eventually they will come around, I
Think to yellow will mean revert to the more apple by philosophy of trading.
source
How many banks have to fail before the Fed halts interest rate hikes? – Zoomer
Citigroup at HUGE risk!!!!!! Get your money out now!!!!!
Hey CNBC, this guy is better than Tom Lee
who cares its going to be all over in 6-12 months and rates will peel back.
LOL another so called "Expert" making his pronouncements from the "Mount". Stupidity knows no bounds and this guy is talking his 'Book'.
No systemic risk? The regulators literally cited systemic risk in Sunday's unprecedented announcement.
legal action should be sought against banking regulators who allowed this institution to trade while insolvent.
This country is doomed, Rich Elites will again do another Bailout.
Capitalism in Profits, Socialism in Losses with Tax payer money.
Middle class is struggling with normal daily expenses.
Fake Democracy is just to show, real Deep state controls everything from Fed, politics to War.
Income inequality is at all time high.
Rich 0.0001% owns everything and poor middle class do modern day slavery.
And now there are AI ChatGPT which will further take away remaining jobs.
So the seven figure guys don't know that when interest rates go up LT bonds go down. They probably got their jobs based on a check box
J. Powell will go down as the worst in history by far. This man single-handedly painted the U.S economy into a corner because of his insane over-stimulus and refusal to accept that inflation wasn't transitory at the start of the pandemic.
The FED will pivot or at the very least hike less aggressively, let's see what happens on Wednesday
Why isn't anyone discussing why the 10% Bank 'Cash Reserve Requirements' that were waived in March 2020, should be reactivated for Banks!
If ya think of retiree gettin' 2% per annum on savings for yeqrs now, the 1/2% drop this morning in value of The Dollar per Bloomberg, just cost Retiree the loss in wealth is 1/4 of his income this year!! Think of 1/4 of your annual salary at Bloomberg instantly disapearing….wouldn't you be butthurt???
__ КРЪГЧЕТО ЗНАЕТЕ ГОРЕ__
_____________________________/
He means we need a bigger bank to fail
This will cost an estimated TWO TRILLION DOLLARS in bank bailouts which are separate from the deficit spending that will add another TEN TRILLION DOLLARS of debt while Biden is in office. This MEGA MADOFF PONZI scheme of the USA is getting wilder and wilder and there is no stopping or escaping it !?!
😅🤣😅
Two U.S. banks fail in three days,Serious suspicion is to bring down foreign small and medium-sized companies through bank bankruptcy, and then buy them at a low price!
__КОГАТО ВСИЧКИ СЕ НАУЧАТ ЧЕ__|
__СЪС БОГОВЕТЕ НЕ БИВА ДА СЕ __|
_____________ИГРАЕ ОЛИМП_________|
___________________________________/
"They are solid…at least for now."
Hahaha nonsense, they will stop in March already
Default now or default later by hyperinflation… That the grim reality. But my bets is they go for hyperinflation cause it delays things…
Lol the bear is panicking .The Fed will sure pause they just need a reason.
So the fed will swap low interest treasuries, for higher interest treasuries and the banks will swoop in on that deal, and continue to pay 1% interest on longer term CDs based on the old rates. Ok, got it.
The SPX did a 132 point rally in two days after Lehman filed .Then it liquidated .
BEST ECONOMY EVER!!!
Why would you stop inflation if banks won’t stop propping up other governments?
Well . . .During 2008, part of the trick that the fed Played was to give Banks access to a Trillion dollar deposit on the Feds book on which they payed them interest and they were not allowed to with draw it. . . .so on paper it looked like they had a healthy book and sufficient reserves . . .but in Reality . . .they could never with draw that money or use it in case of a shock to the system. Plus that same Trillion dollars was appearing across multiple banks in the mother of all leverages. So here we have 3/4 of a trillion dollars tied up in 30 year T-bills, it seems . . . .in a similar mechanism . . . .it looks great on the books. . . .but when the shit hits the fan . . . .all it did was make the bank look Capitally Adequate and bolstered its Capital Adequacy ratio . . .in reality the bank was insolvent.
Perhaps the Banking Sector needs a stress test to weed out those banks that have these funny money Fed Back stops to make the balance sheet look great but don't actually make the bank Capitally Adequate.
So . . .Are US bonds no longer any good? Because the Fed is going to be printing through both ends . . .hmmmm . . .poppets?
CEO to be blamed
Where is Hildenberg hiding
The dream of "pause" is dashed again
buy the dip
Build back better 😂😂😂😂😂😂😂
This guy is a complete Idiot . Feds have to stop raising or it will be horrible
Fed broke the world. I have no faith in any of it. Free markets my a$$
Fed funds rate higher than deposit rate will continue to destabilize banks as depositors flee for higher yielding treasuries and money market funds. Fed is making a severe policy mistake here by sacrificing the financial system for the illusion of inflation control