Our long holiday has reached its last day, and tomorrow the domestic market will resume trading. However, during this long holiday, the overseas markets have seen dramatic changes.
Just entering May, the second-largest bankruptcy in US history occurred in a bank.
Immediately following, Yellen warned that the US debt could default as early as June 1st.
01, The Second Largest Bankruptcy Case in History
After the collapse of Silicon Valley Bank, the US economic and financial sectors are facing trouble once again.
Previous data showed that the First Republic Bank in the United States experienced an outflow of one hundred billion dollars in a short period, followed by a continuous plunge in the bank's stock price last week.
Finally, on May 1st, the bank declared bankruptcy, and subsequently, most of its assets were acquired by JPMorgan Chase, with eight securities related to the First Republic Bank being delisted and trading terminated simultaneously.
This is the second-largest bank bankruptcy since the failure of Washington Mutual in 2008.
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This news has severely impacted the stock and securities markets, indicating that the investments the bank was engaged in were the same as those of Silicon Valley Bank before. Previous research by American economists has found that there are still quite a few banks in the United States facing similar issues.
Everyone thought the wave of bank bankruptcies had stopped, but想不到 it started the second wave almost immediately.02, Bankruptcy Caused by Interest Rate Hikes
The collapse of banks such as Silicon Valley Bank in the United States was not a sudden event.
The reason Silicon Valley Bank announced bankruptcy was due to a lack of funds, but in essence, there were two main reasons.
The first was due to a large number of depositors withdrawing their deposits, causing a run on the bank and leading to unstable liquidity;
The second reason was that in 2022, some internal deposits in the United States began to experience outflows.
What is similar today is that over the past few years, the assets of First Republic Bank have grown at a rate of ten times, from tens of billions of dollars to hundreds of billions of dollars in assets.
The first and the bank's assets are growing aggressively, which actually carries significant risks. Many securities assets are of the bubble type. Due to the continuous interest rate hikes in the United States, the asset bubble bursts, ultimately leading to bankruptcy.
The market is worried that the second wave of bankruptcy may have a greater impact.
03, U.S. Treasury Bonds Will Default
The most important reason for the bankruptcy of U.S. banks is the continuous decline in the price of U.S. Treasury bonds. Now, U.S. Treasury bonds face a more serious crisis, which is the default issue caused by the debt ceiling.Yellen warned that the temporary tools of the U.S. Treasury Department have almost been exhausted, and there is a possibility that U.S. debt could face a substantial default as early as June 1st. The additional conditions proposed by Congress for the debt ceiling plan did not gain Biden's approval, and further negotiations are needed between the two parties. However, this could lead to the issue of the debt ceiling being difficult to resolve for a long time.
Affected by various unfavorable factors, the U.S. stock market has also experienced a significant decline. In the last two trading days, the Dow Jones Industrial Average was above 34,200 points at its highest, but it fell to 33,400 points at its lowest during yesterday's trading, with the largest drop approaching 800 points.
The Federal Reserve is about to announce the latest interest rate hike decision. It is believed that before and after the announcement of the decision, the fluctuations in the U.S. financial market will further increase, and it cannot be ruled out that new regional banks will fall into crisis.
