Watch The Dollar & US Rates As Credit Suisse May Fail
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Trouble in the banking system has very quickly metastasized from the failures of regional banks, Silicon Valley Bank and Signature Bank, to hit a globally systemic important one, Credit Suisse.
Systemic risk is obviously a major concern now, which is best observed and indicated in two macro markets, the USD and US rates.
Pay very close attention to what they are doing!
- While each bank has its own individual issues that contributed to their problems, the common underlying factor determining their fate is the same – the global repo market (as explained in our article on SVB)
- Systemic risk is obviously a major concern now, which is best observed and indicated in two macro markets, the USD and US rates
- The main indicator to watch for is an alignment in these two markets, where both move together in a direction which signals deteriorating conditions in the global financial markets. This specifically means a stronger USD, and lower US rates
- The more important macro markets, like oil and base metals, that line up in the same direction, the more danger of a global crisis and selloff
- Currently, US rates have begun to move sharply lower, but the USD has yet to breakout of key levels
Charts for this week’s report can be found in the slides embedded at the beginning of the article.
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