Rupee may decline; Asian markets sink after Silicon Valley Bank collapse: 10 points

The collapse of Silicon Valley Bank and Signature Bank made a huge impact on global finances as stocks have lost $465 billion in market value so far.

The declines came after US peers tumbled, with investors questioning whether a government rescue plan for the banking system will prevent more fallout from SVB’s demise. Asian lenders have been seen as more insulated from direct risk, Bloomberg reported.

Depositors withdrew savings and investors broadly sold off bank shares on Monday as the federal government raced to reassure Americans that the banking system was secure after two bank failures fed fears that more financial institutions could fall.

The Indian rupee is expected to decline against the US dollar on Tuesday, tracking losses in Asian equities and currencies on concerns over the spillover fears after the collapse of the Silicon Valley Bank.

Top updates on Silicon Valley Bank collapse:

1. Losses widened early Tuesday, with the MSCI Asia Pacific Financials Index dropping as much as 2.7% to the lowest since November 29. Mitsubishi UFJ Financial Group Inc. slid as much as 8.3% in Japan, while South Korea’s Hana Financial Group Inc. fell 4.7% and Australia’s ANZ Group Holdings Ltd. lost 2.8%.

2. Silicon Valley Bank N.A’s new chief executive officer Tim Mayopoulos said in a letter to clients on Monday that the lender is open and conducting business as usual. All the existing and new deposits are protected by the financial regulator US Federal Deposit Insurance Corp (FDIC), according to the letter seen by Reuters.

3. US President Joe Biden insisted that the system was safe after the second- and third-largest bank failures in the nation’s history happened in the span of 48 hours. In response to the crisis, regulators guaranteed all deposits at the two banks and created a program that effectively threw a lifeline to other banks to shield them from a run on deposits.

4. Despite the message from the White House, investors broadly dumped shares in bank stocks. Shares of First Republic Bank closed down more than 60% even after the bank said it was taking emergency funding from the Federal Reserve and additional money from JPMorgan Chase.

5. New York bank regulators took possession of Signature Bank on Sunday, ousting its leaders and handing day-to-day control over to the Federal Deposit Insurance Corp.

6. Oil prices slipped on Tuesday, extending the previous day’s slide, as the collapse of Silicon Valley Bank startled equities markets and raised worries about a fresh financial crisis. Brent crude futures fell 9 cents to $80.68 a barrel by 0101 GMT. US West Texas Intermediate crude futures (WTI) dropped 16 cents to $74.64 a barrel. On Monday Brent fell to its lowest since early January, while WTI dropped to its lowest since December.

7. Indian government bond yields are likely to continue their downward trajectory on Tuesday, as US peers continue to plunge, while elevated local inflation reading may cap the move. The 10-year benchmark 7.26% 2032 bond yield is expected to stay in the 7.30%-7.36% band after closing lower at 7.3579% on Monday, a trader with a private bank said. The yield ended at its lowest level since Febuary 16, posting its biggest single-session drop since October 4.

8. Gold prices held above the key $1,900 per ounce level on Tuesday as expectations of less-aggressive Federal Reserve rate hikes.

9. Crypto lender Celsius said the firm is working with advisors to transfer funds from Signature Bank to other approved authorised depositories. “At this time, all cash belonging to the estate is secured,” Celsius said in a tweet.

10. The non-deliverable forwards indicate the rupee will open at around 82.30-82.40 to the dollar compared with 82.1225 in the previous session.