Markets absorb bank-risk blows

<p>Kia ora,</p><p>Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news the value of bank stocks are being marked down sharply today, globally.</p><p>First up today, the drama over the failure of some American banks has all the spotlight. Globally, government bond yields fell sharply as investors pared bets of higher interest rates and looked for safety. The US 10-year Treasury yield fell to a five-week low of 3.5% and the 2-year yield lost nearly -50 bps to 4.05%, marking the largest three-day slump since 1987. In Germany, their benchmark 10-year yield fell nearly -30 bps to 2.17% and the UK Gilt was down to 3.27%.</p><p>Regulators are huddling again today, with the US Fed in an unscheduled meeting. Rumours are swirling about other regional US banks, including <a href="https://en.wikipedia.org/wiki/Republic_Bank_%26_Trust_Company" target="_blank"><strong>Republic Bank</strong></a>, a bank based in Kentucky. Their shares are among the hardest hit today. But apart from some localised pressure points, markets are generally calm. The US President is out <a href="https://www.whitehouse.gov/briefing-room/speeches-remarks/2023/03/13/remarks-by-president-biden-on-maintaining-a-resilient-banking-system-and-protecting-our-historic-economic-recovery/" target="_blank"><strong>emphasising</strong></a> the overall regulator responses underway to keep it that way.</p><p>In the UK, <a href="https://www.hsbc.com/news-and-media/media-releases/2023/hsbc-acquires-silicon-valley-bank-uk-limited" target="_blank"><strong>HSBC took over the local unit of SVB for UK£1</strong></a>. It now has to <a href="https://www.bloomberg.com/news/articles/2023-03-13/hsbc-plans-to-inject-2-billion-of-liquidity-into-uk-unit-of-svb" target="_blank"><strong>bolster its liquidity</strong></a> by UK£2 bln to absorb those assets.</p><p>The main fallout so far has been the buildin