BTN with Ethan Heisler

You heard about the business with the pennies, right?

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Dear Bank Treasury Subscribers, Connecting the dots is an age-old pastime, but the dots that bank treasurers see these days are very confusing and challenging to connect, at least without some form of AI. Even the voting members of the FOMC are not sure what picture they see. Amid significant market volatility and economic uncertainty, bank treasurers are just trying to keep their eyes on the horizon and keep their net interest margins steady.

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Dear Bank Treasury Subscribers, Deposit insurance reform is back in the news. You must have heard about it. The Senate Banking Committee held a hearing on it this month, and judging by the comments from the committee members, they could not have chosen a better bipartisan topic to take up and do some legislating like they get paid to do.

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Dear Bank Treasury Subscribers, If you are like most of the bank treasurers who talk to our editors these days, you probably think that the stablecoin hoopla is a fad, a distraction from what you are thinking about right now. We hear you.

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The banking industry reported another solid quarter of earnings, which met and, in some respects, exceeded analyst estimates. Storm clouds on the horizon remain muted…

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Music by Phantom Sun.

This month’s newsletter covers speculation on the timing of the first rate cut, the positives and negatives of an inverted yield curve and higher for longer, the effect of QT on reserves and bank deposits now that the balance of the RRP appears to have hit a floor, and why rate cuts will not necessarily lead to lower deposit rates.

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Music by Phantom Sun.

This month's newsletter is dedicated to the memory of Gerry Corrigan, the sixth president of the New York Fed from 1985 to 1993, known as the Fed's plumber, the go-to guy Paul Volcker and Alan Greenspan turned to in a financial crisis.

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Music by Phantom Sun.

Wonders never cease in the bank treasury world, what with earthquakes in the metro NYC area to eclipses of the sun, but surely the sudden flattening of the yield curve this month, which is now half as inverted as it was last month, must stir the imagination of even the most experienced bank treasurer. This month’s newsletter pulls back the curtain on key talking points in the bank treasury world, explaining why a neutral balance sheet is not risk-free, why neutral, risk-free interest rates may not exist, why bank treasurers should never count on liquidity to be there when they need it, and why regulators trying to prevent liquidity problems in the banking system with pre-positioned collateral at the discount window may make bank treasury even more complicated than it already is.

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Music by Phantom Sun.

On the first anniversary of the crisis last March, this month’s newsletter looks at the unique circumstances and mistakes that ultimately led to the failure of SVB and lessons learned. One of those lessons is to beware of lessons learned, especially when they are based on “flawed, post-mortem reviews,” as Fed Governor Bowman argued this month. Even if the Basel 3 Endgame proposal looks like it is headed for a delay, our bank treasury contacts tell the newsletter that bank supervisors are already tightening guidance. A particular NYC regional bank was likely a victim of their new hardball approach. On a positive note, banks see stabilizing trends in their deposit balances and pricing and uninsured depositors are not in crisis mode anymore. However, most also believe that unless rates go back to 0%, depositors are not going to shift back to checking levels held as recently as two years ago, when noninterest-bearing deposits in the system equaled 30% of total deposits, compared to 23% last quarter.

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Music by Phantom Sun.

This month’s newsletter discusses how bank treasurers restructured their underwater bond portfolios last quarter when the 10-year rallied in November and December. It also explains why bank treasurers, most of whom believe they have more to fear from the Fed cutting rates by 300 basis points than raising them, are more hedged for higher rates going into 2024 than they were going into 2023.

Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts, Spotify, and Amazon. Follow us on LinkedIn.

Music by Phantom Sun.