Details Cookies
United Kingdom
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

The guessing game is on The guessing game is on The guessing game is on

The guessing game is on

Equities 8 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  Equities reacted initially on a positive note to the US government bailout of uninsured deposits at the now failed banks SVB Financial and Signature bank. However, the immediate sigh of relief has been substituted by one big guessing game of what happens next. The financial system is extremely complex and nobody knows what will happen next. We go through the cross-asset moves in today's trading session and explains the current dynamics unfolding including which indicators investors should be watching.

Nobody knows what happens next

The fallout from SVB Financial as we wrote in our Friday equity note The deposit game: A warning shot has been fired is a massive unknown at this point. When a crisis like this comes out of the blue for regulators it means that this is big hidden risk in the system. The equity market initially celebrated the full backstop of uninsured deposits at SVB Financial, the HSBC takeover of SVB’s UK unit, and the inclusion of Signature Bank (which was taken over by US regulators yesterday) into the deposit backstop. But the mood quickly reversed with banking stocks falling in Europe and US banks down in pre-market session. Bond yields are coming down, further Fed and ECB rate hikes are being significantly reduced in futures markets, the USD is weaker, and interbank stress is rising. Listen to our podcast from today and our QuickTake from this morning for more cross-asset perspectives.

The most significant movement we are observing in the market is the plunge in short-term bond yields with the US 2-year yield trading 4.08% down 50 basis points. Corporates, which are the biggest holders of uninsured deposits, are most likely converting on a large scale deposits to short-term bonds. This is naturally increasing the risk in the system as it drains the banking system for deposits for some financial institutions. As we highlighted in our equity note on Friday, we are observing a very unique situation with deposits in both the US and European banking systems falling the most ever observed over the past year. According to a Wall Street Journal article in early March US bank deposits fell on an annual basis for the first time since 1948. Not even during the S&L crisis or the Great Financial Crisis caused this drainage of deposits.

US 2-year yield | Source: Bloomberg

Key indicators to watch

Interbank market

Due to the conversion of deposits in the system there is a lot of pressure on funding. This is measured by the FRA-OIS 3-month spread. This spread measures forward rate agreements (FRA) pricing among financial institutions relative to the risk-free overnight rate. It thus measures the stress in the interbank market. It is important to note that there are other indicators on the interbank market and this indicator does not reflect the full picture.

FRA-OIS 3-month spread | Source: Bloomberg

VIX level and forward curve

Equity options are another part of the market worth watching these days as equity options were relatively relaxed well into Friday’s session before they finally began to move. The VIX Index has jumped to ~30, the highest level since late October, and the VIX forward curve is now the most inverted since the lows during the start of pandemic.

VIX Index | Source: Bloomberg
VIX forward curve

Banking stocks

US and European banks are of course the epicentre of the ‘deposit game’ and thus investors should monitor these two markets. We have highlighted the Lyxor STOXX Europe 600 Banks UCITS ETF and iShares S&P US Banks UCITS ETF below on a 5-year total return performance chart.

US vs European banks | Source: Bloomberg

Private equity

Listed private equity firms were one of the hardest hit parts of the equity market on Friday and one of the hardest hit segments again today. Like venture capital firms the private equity industry relies on smooth access to capital markets and funding. Contrary to 2008 the private equity industry is much larger today and thus a much bigger risk to the financial system and economy than ever before.

Listed private equity | Source: Saxo

Italian yield spread and equities

Based on today’s price action it is clear that the market is the most worried about Italy so investors should also be tracking Italian equities and Italian-German bond spreads.


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 (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. 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
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.