Concerns about the US banking sector have resurfaced in recent days after First Republic Bank announced its first-quarter results of a larger-than-expected deposit outflow (-41%) and the publication of press articles saying the bank was considering sales. up to $100 billion in long-term bonds and mortgages to restructure its balance sheet. The bank’s advisers also reportedly approached 11 of the largest US banks, which last month agreed, as part of a plan implemented jointly with US regulators, to provide the bank with term deposits totaling $30 billion. buy its bonds at an above-market interest rate, arguing that their total loss will be less than the cost to the Federal Deposit Insurance Agency in the event of a bank failure.

Along with renewed pressure on the banking system, US economic data suggests a slowdown in economic growth (1.1% year-on-year in the first quarter of 2023, compared with 2.6% in the last quarter of 2022) amid aggressive monetary tightening. the Fed’s credit policy from March 2022 begins to have a noticeable impact on economic activity. The possibility of a delayed decision by Congress to increase or suspend the national debt limit (before the Treasury Department exhausts the emergency measures it has introduced since the beginning of the year to avoid a default) has also weighed on the investment climate in recent days.

Under these conditions, US government bonds have strengthened over the past week, as have European bonds, but to a lesser extent compared to them, as new statements from ECB officials leave open the possibility of another rate hike at the next monetary policy meeting. May 4 at 50 mph. In the currency markets, the dollar fell along with the EUR/USD. to reach a new year-to-date high at 1.1095 on Wednesday as there is room for a 25bp uptrend. interest rates from the Fed in June (after an expected hike of the same size on May 3) were capped at just 5%.

* Department of Financial Analysis and Research of International Capital Markets of Eurobank.