Trader TV: This Week – The Banking Crisis and Fed Hike

Published on 20 March 2023

A global forecast of trading activity and liquidity for the week ahead.

North America

  • SVB and Credit Suisse crisis. Challenging liquidity picture if volume continues, busy week
  • Primary equities IPOs: moderate week, B2B, and commercial property
  • Fed’s rate decision on March 22: Recession positioning


  • Credit Suisse crisis: Trading spikes of financials on dark pool and lit trading doubled since Jan 2023
  • Bond activity is high but poor liquidity
  • ECB 0.50bp hike: Enough to silence fears of financial collapse?


  • SVB and Credit Suisse knock-on effects; Yen rose against the dollar
  • Primary equities: several IPOs in tech and hospitality in Japan
  • Inflation data on Japan on March 23

Transcript of interview:

Jo Gallagher: Welcome to Trader TV this week. 

In North America the liquidity picture has been poor despite high volumes and a busy barter market is expected this week. 

In EMEA, liquidity was squeezed and markets can look hectic. 

In APAC, liquidity in the region has also been heavily affected and markets will be active. 

Now in more detail. In North America, it’s been a tumultuous week across US markets with no sign of subsiding. High volumes mask poor liquidity and financial stocks were a big focus of activity. Buy-side traders seeking opportunities mainly to focus on large, dark equity or non-call bond trades to minimize market impact. 

In primary equities, it will be a moderate week in terms of IPOs, with listings in B2B and commercial property. Across the board Fed’s rate decision will dictate activity across equities and bonds and the long term positioning of a recession. 

In EMEA, last week saw huge spikes in trading financial stocks on dark pools, activity almost doubled on venues compared to January of this year and spreads have widened. There’s also been poor liquidity in fixed income, despite high volumes. 

Volatility from financials and central bank decisions is likely to make liquidity challenging this week unless markets feel central banks have done enough to quell fears of instability. 

In Asia Pacific ,buy-side traders also saw knock on effects to liquidity across markets from the fallout of regional lenders and the stability of Credit Suisse. The yen, meanwhile, rose against the dollar. In primary equities there are several new tech and hospitality IPOs being listed on the Japan exchange this week, and we shall see data on Japan’s inflation rate from Thursday, March 23rd. 

Hello, I’m Jocelyn Gallagher, and joining me this week is Bluford Putnam at CME and Carl Tannenbaum at Northern Trust. 

Welcome to the show. 

Blu Putnam: Thank you. Glad to be here. 

Carl Tannenbaum: Good to join you. 

Jo Gallagher: Now, looking at North America, what are some of the scenarios that equities and fixed income traders need to plan for this week? 

Blu Putnam: Well, anytime you have a banking disruption of any kind, no matter how well contained by the regulators in the central bank, there’s going to be ripple effects through the economy for the next year or more. We’re going to see more layoffs in the tech sector. Emerging companies are going to have trouble with their next funding rounds. So the economy is going to have a lot of headwinds. Now, we understand that and the Federal Reserve understands that. But in their meetings, they have to decide how restrictive do they really want to be. 

It’s clear that we have an inverted yield curve. Short term rates are higher than long term bond yields. So that’s already restrictive by many people’s definitions. So the Federal Reserve will be seeking to further calm markets, but also probably let us know that they’re either close to the end or at the end of raising rates because it’s clear we’re in a restrictive policy zone already. 

Jo Gallagher: In EMEA how might traders approach this week and what are some of the liquidity issues that they might face? 

Carl Tannenbaum: Certainly, we’ll be watching the tentacles of the Credit Suisse situation as it moves within Switzerland and around the rest of Europe. But I think if there is more contagion, it will involve a collaboration between the Swiss and European central banks to cover all of that territory, certainly hoping that it doesn’t come to that point. 

Last week we saw Madam Lagarde at the ECB stay focused on inflation, which is much worse in the euro area than it is in the United States. And so she confidently raised interest rates by 50 basis points, although the statement had a nod to the potential for financial instability. 

As we move this week to the Bank of England. They’re a little bit closer to the end of their tightening cycle than the ECB is, and we’ve yet to see a British bank name that prominently in the press, and so perhaps Andrew Bailey and his monetary policy committee will be able to focus on the outlook for inflation, probably a little bit more to do there, but hopefully not too much. 

Jo Gallagher: Looking at APAC, what are some of the scenarios that traders need to be thinking about in that region and how might this play out? 

Blu Putnam: Their banking system has not directly been involved in what’s going on in the US and in Europe. And so we’ve actually seen inflows in to the yen. We’re at the end of the fiscal year in Japan, and that also can lead to some more inflows. So the Japanese yen has been strong, even though they had the most accommodative monetary policy of the major central banks. We’ve also seen some weakness in oil prices, where about $10 down over the last week on oil and of course most of the countries in Asia, but certainly China and Japan are importers of energy. So they’re not going to worry much about their inflation data. Things are looking up for them. 

Carl Tannenbaum: There is a meeting coming up this week between President Xi and Putin. The Chinese have been trying to position themselves to perhaps defuse that tension which has hung over world markets. Certainly not expecting anything revolutionary and certainly not anything that’s going to resolve the crisis any time soon. But I think that Xi’s presence there sort of notes that China has a lot of economic headwinds it’s facing. And perhaps one of the things he’s trying to do is gain some success in the diplomatic arena, which is eluding him somewhat in the economic arena. 

The most recent party, Congress, committed rather tentatively to a growth target that is much lower than it has in the past and given, again, some of the things that they’re contending with, growth may actually be lower than that with, of course, implications for other countries in peripheral Asia. 

Jo Gallagher: Thank you, Blu and thank you, Carl, for your insights. And thank you for watching. 

This has been Trader TV this week.