Investors flock to cash fastest since start of the pandemic amid banking turmoil

As the banking system faces uncertainty, investors are rushing to cash at the quickest rate since the pandemonium of the early days of the COVID-19 pandemic.

Bank of America researchers, led by Michael Hartnett, said in a note that there has been an enormous wave of inflows into cash funds across the world following the collapse of Silicon Valley Bank and the absorption of Credit Suisse into UBS. The team also predicts that credit and equity markets will falter in the next few months.

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According to Bloomberg,” Credit and stock markets are too greedy for rate cuts, not fearful enough of recession ,” according to the researchers.

Over the past month, there have been enormous inflows into regional cash funds, reaching almost$ 143 billion in just the week that ended on Wednesday. The highest level ever recorded in terms of property in money market funds is now over$ 5 trillion.

When the property market is performing poorly and there is a lot of financial uncertainty, people often go to money. The SVB decline has reportedly roiled the stock market, which has behaved like a see-saw, swinging up and down unexpectedly as investors take in various bits of financial information.

Stock index are typically lower when looking from the beginning of the new year and are in the purple over the past month.

The SVB failing had an impact on the financial markets in Europe as well as the United States.

After investors in Credit Suisse started to leave the company in the midst of the turmoil, UBS agreed to buy out a rival Swedish company, Kredit Suisse, next week. Credit Suisse was purchased by UBS for just over$ 3 billion, or a small portion of the company’s estimated market value.

Deutsche Bank, based in Germany, fell by 11 % on Friday, making it the most recent victim of banking uncertainty. The megabank’s value dropped on three consecutive days, with stock losing more than a five of their total worth so far this month alone.

Olaf Scholz, the German president, addressed the issue on Friday and stated that there is no reason to make predictions about the future of the company. According to CNBC, Deutsche Bank has” completely reorganized and modernized its business model” and is a very lucrative institution.

Janet Yellen, the Treasury Secretary, and Jerome Powell, chairman of the Federal Reserve, have been attempting to increase public trust in the finance program.

The federal government announced that it would back all deposits in Silicon Valley Bank and Signature Bank, including those in excess of the FDIC’s$ 250, 000 in, in an effort to prevent a run on other banks and causing harm to the market at large.

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The Bank Term Funding Program, a fresh source of funding for businesses that may experience runs by depositors, was also introduced by the central banks. For security valued at line value, the Bank Term Funding Program provides up to one-year alternatives to banks and other financial institutions.

The Bank Term Funding Program’s borrowing has rapidly increased to$ 53.7 billion, up from$ 344.6 billion the week before, according to a Thursday email on emergency loans. The Fed’s cheap window, which is its ongoing system for lending to banks that may be experiencing liquidity issues, is another factor that contributes significantly to borrowing.