Displaying items by tag: banks
REIT Exposure to Silicon Valley Bank Limited
According to analysis by S&P Global Market Intelligence, U.S. equity REITs have little direct exposure to Silicon Valley Bank, which had the second-largest bank failure in U.S. history. Office REIT Cousins Properties Inc. reported Silicon Valley Bank as its ninth-largest tenant by annualized rent as of 2022 year-end at just over $8.4 million, or roughly 1.2% of the REIT's total rental portfolio. The REIT leases 204,751 square feet of office space to the bank at its Hayden Ferry property in Tempe, Arizona. Boston Properties Inc. houses Silicon Valley Bank's Seattle office in its recently acquired Madison Centre property. In addition, Paramount Group Inc. leases office space to SVB Securities LLC, an entity under the SVB Financial Group umbrella, at 1301 Avenue of the Americas in Manhattan, N.Y. Alexandria Real Estate Equities Inc. reported in a March 13th news release that it has one lease with an affiliate of Silicon Valley Bank in the Greater Boston area market totaling 32,152 rentable square feet. The lease's annual rental revenue as of Dec. 31st, 2022, was $1.7 million, or 0.08% of the REIT's total annual rental revenue.
Finsum:According to S&P Global Market Intelligence, U.S. REITs had limited exposure to Silicon Valley Bank, with some REITS reporting that SVB made up a small percentage of their rental portfolios.
Banking Crisis Roiling Agency Mortgage Bond Market
Concerns over the banking sector are currently making things rough in the $8 trillion agency mortgage bond market. Agency mortgage bonds are widely held by banks, bond funds, and insurers as they are backed by mortgage loans from government-controlled lenders Fannie Mae and Freddie Mac. They are far less likely to default than most debt. They are also easy to buy and sell quickly, which is why they were Silicon Valley Bank’s biggest investment before its troubles. However, agency mortgage bonds are vulnerable to rising interest rates like all long-term bonds. This pushed their prices down last year and also saddled banks such as Silicon Valley Bank. In fact, the risk premium on a widely followed Bloomberg index of agency MBS hit its highest level since October last week, as climbing interest rates led to volatile global markets. According to bond fund managers, this certainly reflected fears that other regional banks might have to sell their holdings. When benchmark interest rates rise, bonds that were sold at times of lower rates lose value. For instance, prices of low-coupon agency mortgage bonds started dropping about a year ago, when the Fed raised interest rates to tame inflation and also indicated that it might start selling the mortgage bonds that it owned.
Finsum:With faltering banks such as Silicon Valley Bank holding large amounts of agency mortgage bonds, the turmoil in the banking industry is roiling the $8 trillion agency mortgage bond market.
Bond Market Volatility at Highest Since 2008 Financial Crisis
Bond volatility continued to explode last week due to growing contagion fears from U.S. banks. Last Monday, after a weekend in which the U.S. government intervened to protect depositors of Silicon Valley Bank and Signature Bank, the 2-year U.S. note yield experienced its biggest one-day fall since October 20th, 1987. Outside of U.S. hours, it dropped the most since 1982. That intraday drop of close to 60 basis points even exceeded the declines during the 2007-2009 financial crisis, the September 11th, 2001, terrorist attacks, and 1987’s Black Monday market crash. Gregory Staples, head of fixed income North America at DWS Group in New York told MarketWatch that the week’s decline in the 2-year U.S. yield came as the result of “de-risking of portfolios and draining of liquidity, stemming from concerns about the health of the U.S. banking system, exacerbated by questions about the future of Credit Suisse.” The ICE BofAML Move Index, which measures bond-market volatility, surged on Wednesday and Thursday to its highest levels since the fourth quarter of 2008, during the height of the Financial Crisis. Volatility then continued on Friday over concerns around First Republic Bank. This sent Treasury yields plunging, one day after they spiked on the news of a funding deal.
Finsum:Last week, the ICE BofAML Move Index, a measure of bond-market volatility, soared to its highest levels since the 2008 Financial Crisis as banking concerns continue.
First Republic Nabs $9.2 Million Morgan Stanley Private Wealth Team
First Republic Bank’s recruiting spree is paying off with the recent announcement that the bank nabbed a Morgan Stanley team managing $1.2 billion in assets for ultra-wealthy clients in Los Angeles. The six-person team is led by advisors Alexander H. Kadish, Nicholas Davey, and J.P. Garofalo, who generated a combined $9.2 million in revenue. The team, which specializes in helping executives with large corporate stock plan holdings, also moved with three support staff. In addition, another former member of their team, Robert A. Daly Jr., will continue to work with the team as an outside consultant. Daly and Kadish moved the team to Morgan Stanley in 2016 from J.P. Morgan Advisors. Kadish has worked at six firms over his 21-year career. He started at discount broker Banc of America Securities in 2001, then shifted to Smith Barney in 2003 and worked for Jefferies & Co before joining J.P. Morgan Advisors in 2010. Daly started his career at J.P. Morgan’s Bear, Stearns & Co. in 1998 and also worked at UBS Wealth Management USA before rejoining J.P. Morgan in 2009. Garofalo started with Wells Fargo Advisors in 2013 and has worked for Morgan Stanley, Ares Investor Services, and Nuveen Securities before returning to Morgan in 2020. The addition of the team brings First Republic’s 2023 recruiting total to four teams managing a combined $4.6 billion in assets.
Finsum:First Republic Bank lured away a $9.2 million team from Morgan Stanley bringing its recruiting tally for 2023 to $4.6 billion in assets.
Chicago Fed President: Volatility Can Create Financial Restrictiveness
Last week, Federal Reserve Bank of Chicago President Charles Evans said that volatility in the markets can create additional restrictiveness in financial conditions. Last week, global markets saw increased volatility triggered by turbulence in the UK markets. Investors in the UK were spooked by the government’s program of unfunded tax cuts, which sent the pound tumbling and the cost of government debt spiking. In fact, volatility bets last week were at their highest levels since March 2020. Evans said that “The U.S. economy and inflation are going to be largely dictated by the stance of monetary policy and everything else that is going on supply shocks, the labor issues we're dealing with. It is a case that financial market volatility can add to additional financial restrictiveness. So, anything around the world in terms of policy or developments like Russia's invasion of Ukraine can add to additional restrictiveness." Still, he did not indicate that financial conditions would change the Fed’s current course.
Finsum: Chicago Fed President Charles Evans stated last week that market volatility can create additional restrictiveness in financial conditions, but gave no indication the Fed would change course.