On Thursday March 9, the stock price of Silicon Valley Bank (SVB), the fifteenth largest bank in the US by total assets was down 30%, eventually ending the day down 60%. That day, its customers – mostly venture capital firms and startups – began pulling their money out of the bank. By the end of the day $42 billion had been withdrawn.
To put this in perspective, prior to this event, the largest bank failure occurred during the global financial crisis. At this time, it took ten days for $16 billion to leave that bank. Last month, the $42 billion exited in a single day, with another $100 billion slated to be withdrawn the following day. This event marked the first social media driven bank run.
By the next day, the Federal Deposit Insurance Corporation (FDIC) took control of the bank. That Sunday, March 12, the FDIC took over another regional bank, also a main source of liquidity for digital asset participants. This activity created the equity markets own March madness. Some regional bank stock prices were down 20-30% at the height of the turmoil, with even some of the larger regional banks dropping 5-10%.
Volatility spiked and volumes popped the following week, as markets digested what this banking turmoil meant for the US economy and the Fed’s policy moves. Prior to these events, markets had expected a 50 bps rate hike in March, after signs that the labor market remained hot. The regional bank turmoil – viewed by many as a sign that monetary policy had worked its way into the economy – led markets to revise down expectations and the FOMC vote to hike only 25 bps.
In light of the events in March, the Securities Industry and Financial Markets Association (SIFMA) analyzed volatility and volume activity in US equities and the US Treasury markets.
- VIX: Peaked at 26.52, +39.0% to the five-day average prior to the turmoil – note, 2022 saw 99 days > this peak
- Equity volumes: Peaked at 20.1 billion shares, +83.1% to the five-day average prior to the turmoil
- MOVE: Measures implied UST volatility; peaked at 198.71, +83.1% to the five-day average prior to the turmoil
- UST volumes: Peaked at $1,492.6 billion par value, +106.8% to the five-day average prior to the turmoil