{"id":2325,"date":"2023-03-15T08:02:40","date_gmt":"2023-03-15T13:02:40","guid":{"rendered":"https:\/\/embarrdowns.com\/fed-rate-hikes-fuel-bank-run-at-svb-why-the-fed-may-slow-down-on-rate-increases\/"},"modified":"2023-03-15T08:02:41","modified_gmt":"2023-03-15T13:02:41","slug":"fed-rate-hikes-fuel-bank-run-at-svb-why-the-fed-may-slow-down-on-rate-increases","status":"publish","type":"post","link":"https:\/\/embarrdowns.com\/fed-rate-hikes-fuel-bank-run-at-svb-why-the-fed-may-slow-down-on-rate-increases\/","title":{"rendered":"Fed Rate Hikes Fuel Bank Run at SVB: Why the Fed May Slow Down on Rate Increases"},"content":{"rendered":"

Mortgage News Daily has reported that the average rate on a 30-year fixed mortgage has decreased to 6.57%, down from 6.76% on Monday and the highest point of 7.05% last Wednesday.[0]<\/a><\/sup> The 10-year Treasury yield has fallen nearly 40 basis points since last Wednesday, while the average 30-year mortgage dropped from 7% on Thursday to 6.57% on Monday, Yahoo Finance reports.[1]<\/a><\/sup> The potential of rate hikes creating difficulties for banks is now a concern for the Federal Reserve, as the institution is not eager to damage the banking industry.[2]<\/a><\/sup><\/p>\n

Before Silicon Valley Bank (SVB)\u2019s meltdown, many investors expected the central bank to keep pace with rate increases when policymakers next meet on March 21 and 22.[2]<\/a><\/sup> Last week, the focus of conversation was centered around whether or not the Federal Reserve would raise rates by a quarter or a half of a percentage point, similar to their adjustments in February and December, respectively. This was reported on by the Wall Street Journal.[2]<\/a><\/sup> Investors, analysts, and experts previously believed that the trend would continue, however, now they believe it will slow down or even be put on hold.[2]<\/a><\/sup><\/p>\n

In the second week of March, indicators of distress at SVB prompted a bank run that ultimately led to its downfall.[2]<\/a><\/sup> SVB, a bank primarily serving tech, startups, and venture capital, invests clients’ deposits in generally safe securities such as bonds.[2]<\/a><\/sup> With the Fed raising interest rates, the value of bonds has decreased.[3]<\/a><\/sup> SVB would usually not have a problem; they would just wait for the bonds to reach maturity.[2]<\/a><\/sup> Due to a decline in venture capital and tech investment, there is now less available capital and this has led to a reduction in deposit inflows, with clients withdrawing their funds as a result.[2]<\/a><\/sup> It became evident that SVB was in a severe lack of funds, leading to fear and eventually causing the bank to fail.[2]<\/a><\/sup><\/p>\n

A multitude of factors caused customers to lose confidence and remove their funds from both banks.[4]<\/a><\/sup> The Federal Reserve’s rapid succession of interest rate hikes over the last year, in order to combat inflation, had a significant effect on SVB. This was a drastic change from the 14-year period prior, wherein obtaining a loan was much more affordable.[4]<\/a><\/sup><\/p>\n

Many of SVB’s clients were simultaneously withdrawing funds.[5]<\/a><\/sup><\/p>\n

0. <\/span>“Mortgage rates tumble in the wake of bank failures” CNBC, 13 Mar. 2023, https:\/\/www.cnbc.com\/2023\/03\/13\/mortgage-rates-tumble-in-wake-of-bank-failures.html<\/a><\/a><\/p>\n

1. <\/span>“Mortgage rates are dropping after Silicon Valley Bank collapse. How low will they go?” San Francisco Chronicle, 13 Mar. 2023, https:\/\/www.sfchronicle.com\/realestate\/article\/mortgage-rates-silicon-valley-bank-17836939.php<\/a><\/a><\/p>\n

2. <\/span>“Silicon Valley Bank collapse: Is the Federal Reserve to blame?” Vox.com, 14 Mar. 2023, https:\/\/www.vox.com\/money\/2023\/3\/14\/23640065\/silicon-valley-bank-collapse-fdic-interest-rates-federal-reserve<\/a><\/a><\/p>\n

3. <\/span>“Silicon Valley Bank: Staving off crisis” The Indian Express, 15 Mar. 2023, https:\/\/indianexpress.com\/article\/opinion\/editorials\/silicon-valley-bank-staving-off-crisis-8497451<\/a><\/a><\/p>\n

4. <\/span>“What Silicon Valley Bank’s Collapse Says About the Easy Money Era Ending” PBS, 14 Mar. 2023, https:\/\/www.pbs.org\/wgbh\/frontline\/article\/silicon-valley-bank-federal-reserve<\/a><\/a><\/p>\n

5. <\/span>“How Covid lockdowns primed the current financial crisis” The Grayzone, 15 Mar. 2023, https:\/\/thegrayzone.com\/2023\/03\/15\/covid-lockdowns-financial-crisis\/<\/a><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Mortgage News Daily has reported that the average rate on a 30-year fixed mortgage has decreased to 6.57%, down from 6.76% on Monday and the highest point of 7.05% last Wednesday.[0]<\/a><\/sup> The 10-year Treasury yield has fallen nearly 40 basis points since last Wednesday, while the average 30-year mortgage dropped from 7% on Thursday to 6.57% on Monday, Yahoo Finance reports.[1]<\/a><\/sup> The potential of rate hikes creating difficulties for banks is now a concern for the Federal Reserve, as the institution is not eager to damage the banking industry.[2]<\/a><\/sup><\/p>\n

Before Silicon Valley Bank (SVB)\u2019s meltdown, many investors expected the central bank to keep pace with rate increases when policymakers next meet on March 21 and 22.[2]<\/a><\/sup> Last week, the focus of conversation was centered around whether or not the Federal Reserve would raise rates by a quarter or a half of a percentage point, similar to their adjustments in February and December, respectively. This was reported on by the Wall Street Journal.[2]<\/a><\/sup> Investors, analysts, and experts previously believed that the trend would continue, however, now they believe it will slow down or even be put on hold.[2]<\/a><\/sup><\/p>\n

In the second week of March, indicators of distress at SVB prompted a bank run that ultimately led to its downfall.[2]<\/a><\/sup> SVB, a bank primarily serving tech, startups, and venture capital, invests clients’ deposits in generally safe securities such as bonds.[2]<\/a><\/sup> With the Fed raising interest rates, the value of bonds has decreased.[3]<\/a><\/sup> SVB would usually not have a problem; they would just wait for the bonds to reach maturity.[2]<\/a><\/sup> Due to a decline in venture capital and tech investment, there is now less available capital and this has led to a reduction in deposit inflows, with clients withdrawing their funds as a result.[2]<\/a><\/sup> It became evident that SVB was in a severe lack of funds, leading to fear and eventually causing the bank to fail.[2]<\/a><\/sup><\/p>\n

A multitude of factors caused customers to lose confidence and remove their funds from both banks.[4]<\/a><\/sup> The Federal Reserve’s rapid succession of interest rate hikes over the last year, in order to combat inflation, had a significant effect on SVB. This was a drastic change from the 14-year period prior, wherein obtaining a loan was much more affordable.[4]<\/a><\/sup><\/p>\n

Many of SVB’s clients were simultaneously withdrawing funds.[5]<\/a><\/sup><\/p>\n

0. <\/span>“Mortgage rates tumble in the wake of bank failures” CNBC, 13 Mar. 2023, https:\/\/www.cnbc.com\/2023\/03\/13\/mortgage-rates-tumble-in-wake-of-bank-failures.html<\/a><\/a><\/p>\n

1. <\/span>“Mortgage rates are dropping after Silicon Valley Bank collapse. How low will they go?” San Francisco Chronicle, 13 Mar. 2023, https:\/\/www.sfchronicle.com\/realestate\/article\/mortgage-rates-silicon-valley-bank-17836939.php<\/a><\/a><\/p>\n

2. <\/span>“Silicon Valley Bank collapse: Is the Federal Reserve to blame?” Vox.com, 14 Mar. 2023, https:\/\/www.vox.com\/money\/2023\/3\/14\/23640065\/silicon-valley-bank-collapse-fdic-interest-rates-federal-reserve<\/a><\/a><\/p>\n

3. <\/span>“Silicon Valley Bank: Staving off crisis” The Indian Express, 15 Mar. 2023, https:\/\/indianexpress.com\/article\/opinion\/editorials\/silicon-valley-bank-staving-off-crisis-8497451<\/a><\/a><\/p>\n

4. <\/span>“What Silicon Valley Bank’s Collapse Says About the Easy Money Era Ending” PBS, 14 Mar. 2023, https:\/\/www.pbs.org\/wgbh\/frontline\/article\/silicon-valley-bank-federal-reserve<\/a><\/a><\/p>\n

5. <\/span>“How Covid lockdowns primed the current financial crisis” The Grayzone, 15 Mar. 2023, https:\/\/thegrayzone.com\/2023\/03\/15\/covid-lockdowns-financial-crisis\/<\/a><\/a><\/p>\n","protected":false},"author":3,"featured_media":2324,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"_links":{"self":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/2325"}],"collection":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/comments?post=2325"}],"version-history":[{"count":0,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/2325\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media\/2324"}],"wp:attachment":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media?parent=2325"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/categories?post=2325"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/tags?post=2325"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}