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March 15th - Most Gulf stock markets fell slightly on Sunday. Saudi Arabias benchmark index fell as much as 0.8%, with Rajhi Bank down 0.9% and Saudi National Bank, Saudi Arabias largest lender, down 1.9%; the Qatar index fell 0.5%, with Qatar National Bank, the regions largest lender by assets, down 1.3%; Bahrains benchmark index fell 0.3%; and Omans benchmark index fell 0.4%. The conflict between the US, Israel, and Iran has now entered its third week, with US President Trump threatening further strikes against Irans Kharg Island oil export hub, while Iran has vowed to retaliate. Furthermore, three sources familiar with the situation said the Trump administration rejected efforts by Middle Eastern allies to initiate diplomatic negotiations aimed at ending the war between the US, Israel, and Iran. Trump also called on allies to deploy warships to help secure the Strait of Hormuz, crucial to global energy supplies.March 15 (Xinhua) -- Iranian Foreign Minister Araqchi stated that the end of the war depends on two conditions: ensuring that the war will not be repeated and paying reparations. Araqchi also said that Iran welcomes any regional initiatives that can justly end the war. The Strait of Hormuz is open to everyone, except for ships of the United States and its allies.Ukrainian President Zelensky: If the world does not have enough air defense capabilities to defend against ballistic missiles in both Europe and the Middle East, we must deprive Russia of its ability to assemble missiles in its factories.Ukrainian President Zelensky: Each of these missiles contains at least 60 foreign components, which were supplied to Russia by circumventing sanctions. This must be stopped.Ukrainian President Zelensky: In the past week, Russia has launched 1,770 attack drones, more than 1,530 guided air-to-ground bombs, and 86 missiles at Ukraine, including more than 20 ballistic missiles.

After A Fed Rise, The U.S. Banks Stress Index Might Deteriorate

Aria Thomas

Jun 17, 2022 11:09

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An indicator of credit risk in the U.S. banking sector may be exhibiting symptoms of strain as the Federal Reserve's aggressive rate rise path heightens economic pain forecasts.


According to Refinitiv data, the so-called FRA-OIS spread, which measures the difference between the U.S. three-month forward rate agreement and the overnight index swap rate, jumped to 29.50 basis points on Thursday, its widest level since May 23. The value was -11.66 basis points earlier in the week.


Widely regarded as a barometer for banking sector risk, a wider spread indicates that interbank lending risk has increased.


The recent increase in the margin between forward rate agreements and overnight index swap rates is worrisome, according to J.P. Morgan Asset Management global market analyst Jordan Jackson. "As the Fed becomes more hawkish, recession fears increase, hence boosting the underlying credit risk."


The Federal Reserve hiked interest rates by 75 basis points on Wednesday, its largest rise since 1994. Markets have been rocked by the prospect of more dramatic tightening, and fears of a future recession have intensified.


This month, the central bank also started letting bonds to expire off its more than $8 trillion balance sheet without replacing them, a procedure known as quantitative tightening that Jackson warned may possibly deplete the financial system's liquidity.


As the world's biggest holder of U.S. government debt lowers its market presence, this sentiment is shared by other investors who are concerned that market conditions may deteriorate.


"Now that quantitative tightening has formally begun, reserve draining has been rather steady over the last several months," Jackson said, adding that he expects the FRA-OIS disparity to become much wider.


Wall Street also perceives an increase in the likelihood of default by large banks.


On Thursday, credit default swap (CDS) spreads for JP Morgan, Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), and Bank of America (NYSE:BAC) were nearing two-year highs.


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