Morning Commentary: Junk slides as banks weigh on markets; risk aversion quiets primary

By Paul A. Harris

Portland, Ore., March 13 – High-yield bonds opened ¼ point lower on Monday morning as investors continue to weigh fallout from last week's phenomenal collapse of Silicon Valley Bank, a New York-based bond trader said.

All eyes continue to be on the financial sector, said the trader, who noted that trading was halted on stocks of regional banks including First Republic Bank, Zions and Regions Financial, the source added.

Debt securities of SVB Financial Group were lower on the morning as news circulated that the government intended to protect depositors, but the bank would not be bailed out, the trader said, adding that the entire SVB capital structure was trading in the context of 45 bid, 47 offered.

Another trader, this one focused on distressed situations, expressed the belief that current trading levels of SVB’s paper seem high in light of an expected liquidation but added that there could be some short covering taking place.

Risk aversion related to the failures of SVB and Signature Bank soared over the weekend, sources said.

The yield of 10-year Treasuries plummeted to 3.44% on Monday morning from 4.07% on Friday, a trader said.

Amid that risk aversion, the new issue market was shuttered and the active forward calendar stood empty on Monday, market sources say.

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