SVB Rescue Sends Investors Fleeing For Bonds And Gold

On Monday, investors raced to safe-haven assets like Treasurys and gold amid a remarkable strategy to support the banking system and lessen the effects of Silicon Valley Bank's failure.

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The standard 10-year Treasury yield decreased by about 20 basis points to 3.50%, reaching its lowest position since February 3. Last time, the 10-year rate was around 3.54%. The 2-year Treasury yield dropped by more than 40 basis points to 4.16%, which is also its lowest level in more than five weeks. One basis point is equal to 0.01% of the yield, which moves inversely to prices. The 20+ Treasury Bond ETF from iShares

grew by 3%.

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At $1,893.96 per ounce, gold prices rose to their highest level since early February. Gold futures in the United States increased 1.2% to $1,889.40, while the SPDR Gold Trust grew by almost 2%. In times of financial crisis, investors frequently move into the metal. Also, lower interest rates reduce the opportunity cost of owning gold that yields nothing.

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Gold rises

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Investors sought shelter as banking regulators raced to protect depositors at Silicon Valley Bank and the now-defunct Signature Bank in an effort to allay concerns about a systemic contagion. As one of many actions that officials approved over the weekend, depositors at both collapsed institutions would have complete access to their funds.

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John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, said that fear over what might be "the next shoe to fall" spread like wildfire across the markets. "Even though we're not yet in the woods, we still think that,"

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The government's proposals caused stock futures to open higher on Sunday night, but they have since fallen over.

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After regulators closed down a second institution on Sunday, worries about the stability of smaller, financial companies grew. After declaring on Sunday that it had obtained more liquidity from of the Federal Reserve and JPMorgan Chase, First Republic Bank led a slide in bank stock on Monday.

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After falling 33% the previous week, First Republic shares in San Francisco dropped 70% in early trade on Monday. In the premarket, PacWest Bank fell 37% and Western Alliance Bancorp down 29%. KeyCorp dropped 10% and Zions Bancorp lost 11%.

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The failure of SVB was the second-largest U.S. banking failure overall and the biggest since the financial crisis of 2008. HSBC announced a deal to purchase the UK on Monday. After late-night negotiations, a subsidiary of the bankrupt US internet startup lender was established.