The U.S. FRA-OIS spread widens in a sign of banking sector stress, strengthening the case for the Fed to pause rate hikes next week and a continued rally in bitcoin. Reports godbole17.
The borrowing and lending between banks is a crucial component of the banking system that helps banks manage their immediate liquidity needs. When the interbank lending market is strained or dysfunctional, banks face greater liquidity risk, which can result in insolvency.
The surge in the banking stress indicator comes after the failure of three U.S. banks, including the startups-focused, within five days and has prompted investors to reassess their outlook for interest rates. "Financial market stress indicators have risen to the highest levels since the European debt crisis a decade ago. At the same time, credit default swaps, which measure the cost of insuring bond portfolios against defaults, have increased markedly. Bitcoin has benefited as more government guarantees might mean more money printing," Thielen told CoinDesk.
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