Details Cookies
Important margin product information

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Steen image 1142x160 Steen image 1142x160 Steen image 1142x160

Bank runs raise the stakes in the Fragmentation Game

Picture of Steen Jakobsen
Steen Jakobsen

Chief Investment Officer

Summary:  A new fragmented world order can render some of today's infrastructure obselete, but it also calls for massive new investments across the globe, which requires a new set of strategic and tactical investment strategies.

We have the highest bond volatility in history, the war in Ukraine looks to have no end, and monetary authorities have moved the interest dial into a position which was finally able to “break something”. This is partly their strategy, partly a fall-out from a singular focus on fighting inflation without addressing what else might be at risk.

The jarring market events in March also mean that Fed Chair Powell may pivot after all, even after re-pivoting hawkish from his initial pivot. Confused? You should be! As we look forward to the end of this year, we don’t know whether the Fed will deliver another 75-100 bps hikes to fight inflation or cut by 75 bps to protect the fragile bank system and the taxed economic system behind it. How did we get here – could it really be a couple of bank runs that have completely reset forward expectations? On policy, maybe, but not on inflation.

Long Term Capital Management (LTCM) went bust in 1998, the world’s central bankers have used low interest rates and ever larger liquidity injections to induce more and more risk-taking without ever forcing too-leveraged banks and risk takers to take a loss, with the Lehman bankruptcy the exception that really proved the rule on the enormous ensuing bailout during the GFC.

Fast forward to today and we see the March intervention in the wake of the Silicon Valley Bank (SVB) collapse and then the Credit Suisse takeover by UBS arranged and subsidised heavily by the Swiss National Bank. There is even sudden talk of insuring all deposits to prevent bank runs. Are any and all financial institutions now moved into the “systemic” category?

What was SVB’s misstep that saw their stock marked from a price of over 100 to zero in two days? They had no clue what they were doing with their bond portfolio, which they kept growing as deposits came in the door and the Fed, their regulator, kept telling them: “Don’t worry! inflation is transitory, it will be back below 2% soon!”

It seems that transitory didn’t win, so Silicon Valley Bank became the poster child for a very old kind of panic, one in which depositors, lost faith in the bank and made for the exit  all at once. SVB had a very unusual depositor base, but many regional and smaller banks have made similar missteps in investing bank funds in longer duration bonds, risking depositor stampedes to safer shores everywhere.

Regulators helped create the situation with the Held-to-Maturity (HTM) concept in accounting that allows banks to keep their bond holdings at the purchase price despite the mark-to-market value of bonds trading at perhaps a 20-30% discount. After the panic rescue of all of SVB’s depositors regardless of size and a new Fed facility – the BTFP (no, really) that allows any bank to borrow liquidity against its HTM portfolio at par and not mark-to-market, Voila, problem solved! Or is it?

No, because what if a bank’s funding costs on the liability side – the cost of its deposits - rise even if its depositors don’t pull all of their funds but look for places to park their funds at higher rates? Banks have ignored their customers for the longest time, focusing on serving big financial engineering needs of mega caps, private equity, venture capital funds and hedge funds. Now depositors have had enough. Too little transparency, no service and no interest rates. Major US money center banks paid zero interest on the current account as late as last week, where the Fed was expected to take short-term interest rates to well above 5%! 

This banking crisis so far is not about the solvency of banks, but whether the banks can continue to operate profitably if funding costs rise and funds actually “go elsewhere”. How about a US 6-month treasury yielding 4.50%, for example? Big banks can only run with enough liabilities, deposits, to fund their assets. For whatever reason, but especially in a panic, if clients withdraw money, it forces banks to liquidate assets. That’s what this crisis is about.

But enough about bank runs, though the risks mentioned above will inevitably impact what this Q2 Outlook was meant to be about before the bank blowups of March: the Fragmentation Game. This is our term for the global need to secure access to energy, other vital resources, supply chains and computer power (mostly in the shape of semiconductors) but also how new alliances are being formed and shaped to rebalance the world away from western dominance.

We could have called it deglobalisation, but the world is still global in its trade, it’s just fragmenting more into blocs. Navigating these fragments will be key in investing not only this year but for the coming decades.

Being both strategic and tactical has never been more important, as a fragmenting and partially deglobalising world brings new production capacities where none existed before to secure supply chains, which will bring huge investments, as will the ongoing green transformation. Other fragments, on the other hand, may have excess capacity. Regardless, a Fragmentation Game overlay to investment decisions will be critical, as the far-flung, highly tuned and fully globalised networks break into new fragments and alignments.

Safe travels,


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.