As markets look to try & digest all of the recent mayhem, there do seem to be some signs of having reached peak panic.

But not before the US banking fears spilled over to Europe.

Leading to Credit Suisse needing a bailout to stop systemic risk from taking hold.

Let’s explore☟

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➠ PURE PANIC SPREADS TO EUROPE

σ It didn’t take long for US regional banking troubles to spill over to #Europe.

Yesterday, we saw a complete market panic as
@CreditSuisse
came under fire when its largest Saudi shareholders refused to inject more liquidity.

This forced the
@SNB_BNS
to step in to prevent a systemic collapse of the European banking system.

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➠ CREDIT DEFAULT SWAPS EXPLODE

σ The panic caused 1Y CDS (credit default swaps) to explode, pricing in a 30% default probability.

The #ECB asked #EU lenders to disclose their exposure to the counterparty.

Confidence in the global banking system is deteriorating, and policymakers are somewhat panicked.

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➠ LAGARDE IS ADAMANT

σ @ecb’s Lagarde was adamant that a 50bp hike was still coming today and stuck to that.

But markets didn’t buy it and priced in only 25bps leading up to the announcement.

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➠ #FED RATES EXPECTATION PLUMMET

σ
@federalreserve
rates expectation has also plummeted.

100bps of cuts are now being priced by year-end.

This is only about a week after Powell said in Congress that 50bps was not off the table for next week’s #FOMC meeting.

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➠ MEGA-CAP TECH PERFORMANCE

σ With a dovish Fed now priced into rates markets, stocks will be looking for confirmation from Powell next week to get the go-ahead for lift-off.

However, it’s interesting to note how well mega-cap tech has already started to perform.

Likely in anticipation of said dovish Fed.

Feels like a tactical bottom may be near (peak panic), and don’t forget #OPEX on Friday.

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➠ LOW-RISK WAYS TO GET LONG RISK

σ With all of the above considered, we are looking for low-risk ways to get long risk into April.

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➠ Watch the attached clip from today’s Macro Options Spotlight for more colour on this.

 

➠ Click HERE to watch the full Spotlight right now and also see:

• Recap of yesterday’s & overnight price action

• Today’s Cross Asset Vol Summary

• My thoughts on rates vol going ballistic

• $TLT Vol Dashboard & trade idea

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Just follow click here, then enter code RV2023 at checkout

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➠ What’s your read on this apparent banking crisis we’re seeing?

Or is it not truly a banking crisis (a la 2008) like markets think?

Let me know in the comments!

Cheers!