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JP Morgan swallows First Republic Bank

5 May 2023Banks, Risk CommentaryAccounting, bank resolution, Federal Deposit Insurance Corporation, Federal Reserve, interest rates, JP MorganNick Dunbar

Six months ago we warned about held-to-maturity bond losses at US banks, but now the giants that hedged the risk are hoovering up depositors while unhedged regional banks are in crisis

How generative AI made Nvidia a giant of the S&P 500

5 May 2023Risk Commentary, TechnologyAI, artificial intelligence, equities, Google, Microsoft, Nvidia, OpenAI, semiconductorsNick Dunbar

11 years ago, Geoff Hinton and two grad students used a pair of GPU chips to win an image classification contest. Now these chips are powering the generative AI boom and have doubled Nvidia’s market cap.

ARM and the UK stock market’s addiction to foreign capital

6 February 2023Risk Commentary, TechnologyARM Holdings, equities, regulation, semiconductorsNick Dunbar

The UK government is desperate for Softbank-owned ARM Holdings to have a UK listing. But reversing the long-term trend toward foreign ownership of UK assets requires a rethink of the regulatory and tax obstacles to UK share ownership

Spares and heirs in the capital markets

18 January 2023Credit, Risk Commentarycorporate bondsNick Dunbar

At first sight, corporate bonds did badly in 2022, but aside from a handful of exceptions, this was the result of the sell-off in government debt, our analysis shows. With yields of 4-5%, investment grade bonds are now an attractive asset class.

Banks can’t hide from the pain of underwater bond investments

29 November 2022Banks, Risk CommentaryAccounting, government bonds, interest rate risk, investments, mortgage-backed securitiesNick Dunbar

The biggest US banks amassed $2.2 trillion of government and mortgage bond investments, but now the portfolios are underwater and banks must hold them to avoid recording losses. This will have a lasting effect on deposits and the impact of Fed policy.

When linkers bite back

21 October 2022Economics, Risk Commentaryforecasting, inflation, inflation-linked bonds, national accountsNick Dunbar

Inflation-linked bonds are proving costly to governments that issued them, and in the case of the UK, markets imply the pain will last for years to come.

Gilt trip

29 September 2022Economics, Risk Commentarygilts, pension funds, sovereign debt, United KingdomNick Dunbar

How a populist fiscal experiment brought market mayhem and ended bond investors’ patience – at the worst possible time

Cash positioning for an upwards rate shock

3 May 2022Funds, Risk Commentarycash, Federal Reserve, inflation, money market funds, repo lendingNick Dunbar

While the Federal Reserve anticipates 2-3% interest rates will be enough to combat inflation, the choice of cash holdings for financial institutions provides a clue to their confidence in the Fed’s strategy. The evidence shows that they expect a bumpy ride.

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