The FED has left the US Banking System Destabilized after Unprecedented Interest Rate Cycle

The failure of Silicon Valley Bank is exposing systematic vulnerabilities in the US banking system that will likely force the FED to pivot.

Summary

• Over the last 28 years, US banks used to pay slightly less than the one-year treasury rate on their deposits. Currently, US banks pay 4.2%(!) less than 1-y treasuries, which represent a three-standard-deviation event.

• The Silicon Valley Bank failure exposed to the broad public that bank deposits may also become unsafe and illiquid. As a result, th…