2023-03-31 08:19:35 ET
Banks' borrowing from the Federal Reserve fell by $11.3B as of March 29, as the amount of borrowing from the Fed's discount window dropped more than the use of the new lending facility increased.
"This does suggest that the extent of acute problems in the banking sector is moderating some, even if a subset of banks remain very stressed and the credit impact of the recent shocks remains very unclear," said Evercore ISI's Krishna Guha in a note to clients.
Meanwhile, $66B flowed into money market funds during the week as of March 29, Jefferies analyst Ken Usdin pointed out in a note to clients. "This was slower than the $132B (or +3.2%) increase in the previous week, but nonetheless still a signal of deposit shift from banks," he said.
Banks' balance at the Fed's discount window stood at $88.2B as of March 29, 2023, down $22.1B from a week earlier. Meanwhile, the balance of the Bank Term Funding Program (BTFP), a new facility set up rose to $64.4B, up $10.7B from the prior week, according to the Fed's balance sheet .
The rotation into the BTFP likely reflects favorable pricing/terms compared with the discount window, Usdin said. Also, banks can put up government guaranteed securities for par value through the BTFP, compared with tapping the discount window and taking asset haircuts, he noted.
Recent comments from Fed officials suggested greater confidence that financial policy interventions are making progress in containing the banking stresses, Evercore ISI's Guha said. "with Collins being a bit more hawkish, though Barkin remained careful."
That keeps on the table the potential for more Fed tightening to deal with inflation risk, he said.
In Friday premarket trading, the S&P Bank ETF ( NYSEARCA: KBE ) gained 0.8%, while the SPDR S&P Regional Banking ETF ( NYSEARCA: KRE ) rose 0.4%. Checking in on notable names, JPMorgan Chase ( NYSE: JPM ) increased 0.4% , Bank of America ( NYSE: BAC ) +0.4% , Wells Fargo ( NYSE: WFC ) +0.6% , U.S. Bancorp ( NYSE: USB ) +0.5% , First Republic Bank ( NYSE: FRC ) +1.0% , PacWest Bancorp ( NASDAQ: PACW ) +0.7% .
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Banks' borrowing from Fed slips in past week, suggesting stressses moderating