Little Market Update from the MBS World
SVB / The Fed
First Citizens has bought Silicon Valley Bank’s Assets at roughly an 18% discount, as their Bonds are not worth what SVB paid for them because rates have gone up in the current market. It raises another question, however – What about the Fed?
SVB had roughly $80B in assets, but the Fed has $2.6 Trillion in Mortgage Backed Securities, that they bought at much lower rates. The Fed’s unrealized loss on those positions is almost $500B. They are also now losing money for the first time in history to the tune of about $7B/month because of the interest they are paying on their holdings.
The Fed is forecasting for GDP to be only 0.4% in 2023. And the latest Atlanta Fed GDP forecast is for about 3% In Q1. So that means the Fed is telling us that they expect GDP to essentially decline 2.6% in the remaining three quarters…which is implying a recession. This goes along with a lot of other recession indicators like the Bloomberg Recession model, Inverted Yield Curve, and Leading Economic Indicators, all signaling a recession in the next 6 months.
SKOL Biden's Economy!
PS This is on top of the fact the $ is losing world reserve status.