Roundup: The Buck is Bucking

The Buck is Bucking

Through the noise of bank earnings, we find some signal about the Treasury market.

Banks are booming, credit is tight…feels like 2007, but don’t wait for another 2008 Global Financial Crisis. The March 2023 bank failures demonstrated that the Fed will do just about anything to keep banks afloat. There is a good chance we will not have a 2008 crisis again. Instead, the pain is being felt at the Federal Level.

The good news? Banks posted higher than expected earnings on trading and asset management gains, lifting Morgan Stanley +6.5% and US Bancorp +4.5%, on heavy volume as shown below.

source: Onramp, Koyfin

Good day, but we still believe that the majority of U.S. banks are ‘wards of the state’, captured by the Fed after 2008, with little chance of earning their way out of their capital structures as tech alternatives continue to disintermediate them from clients and capital.