A look at the day ahead in European and global markets from Wayne Cole.

The fact that First Citizens BancShares Inc. (FCNCA.O) is already in advanced discussions to acquire Silicon Valley Bank (SIVB.O) brings some relief. As an additional step toward reassuring depositors, there was also some talk that the Federal Reserve might expand its new lending program for banks.

Money market funds have seen an inflow of more than $300 billion in the past month, bringing their total to a record $5.1 trillion. This clearly indicates that money is moving away from smaller banks and toward their larger siblings. BofA notes that the Fed cut rates following similar events in 2008 and 2020.

Fund futures currently indicate a chance of 88% that the Fed will maintain its current stance in May, while a cut in July is valued at more than 90%.

In the week ending March 15, small bank deposits decreased by $120 billion, while borrowing increased by $253 billion—presumably largely from the Federal Reserve.

According to Capital Economics, as customers look for higher yields, deposits have decreased by $663 billion across all banks over the past year.

“Except if banks will lift their store rates to forestall that flight, they will ultimately need to get control over the size of their credit portfolios, with the subsequent crush on financial movement one more motivation to expect a downturn is coming soon,” they caution.

Deutsche Bank (DBKGn) is under additional speculative stress than other European banks. DE), as well as a general increase in the price of credit default swaps. On Friday, UBS’ five-year CDS increased to 139 bps, while Deutsche Bank’s five-year CDS reached 222 bps, its highest level since late 2018.