Small Victory for SVB Financial as Judge Orders FDIC to Return Tax Refund Checks

Summary:

In a court ruling in New York, the Federal Deposit Insurance Corp. (FDIC) has been ordered to return tax refund checks it took out of the hands of SVB Financial Group, a bankrupt company seeking to compensate bondholders. SVB Financial Group is the corporate parent of failed Silicon Valley Bank. The decision poses concerns the FDIC, which had its sights set on claiming future tax refunds.

On Wednesday, a judge issued a ruling that compels the FDIC to surrender some $10 million worth of tax refund checks made out to SVB Financial Group, Reuters and other sources reported. This marks at least a momentary triumph for the latter in its mission to compensate bondholders.

SVB Financial Group Owes Bondholders

During a court hearing in Manhattan, SVB Financial Group's representative, James Bromley, reportedly disclosed that the company anticipates receiving some $300 million in tax refunds over the next two years.

These refunds, resulting from overpaid taxes, hold great value for SVB Financial. The group needs these crucial assets to repay its creditors.

This may be good news for SVB Financial and certain of its creditors, not for all depositors of the failed bank. A May 13 story in the Wall Street Journal detailed the concerns of depositors, including some in the Cayman Islands, who currently have the lowly status of unsecured creditors. They may never see the funds they deposited again.

The latter find themselves in a tough position as unsecured creditors. This status means that their claims for repayment lack specific collateral and have lower priority compared to secured creditors, thus heightening the uncertainty surrounding the recovery of their funds.

The dispute between SVB Financial and the FDIC has led to a deadlock in the ongoing Chapter 11 case. Further, impeding the progress of the bankruptcy proceedings and posing a threat to the FDIC's established process of repaying creditors. Which in this case means managing deposits totaling over $2 billion.

The FDIC argues that upon assuming control of Silicon Valley Bank (SVB), it acquired ownership of the $2 billion in deposits. Consequently, it asserts, SVB Financial is merely considered a creditor with the right to pursue the collection of the $2 billion.

FDIC Should Act Like Other Creditors

In response to the FDIC's argument, US Bankruptcy Judge Martin Glenn reportedly directed the agency to file a claim like other creditors. Additionally, the judge ordered the FDIC to provide a clear explanation of why it believes it has the right to keep the $2 billion.

"This is a major setback for the FDIC, which is still trying to recoup its costs from rescuing Silicon Valley Bank earlier this year," Markus Levin, co-founder of XYO Network, told BeInCrypto.

"Not only does it set the FDIC back financially on the SVB case, but it may also set a precedent for other bankrupt companies facing similar challenges," Levin added.

The FDIC protected SVB Financial's American depositors when it took over the bank. But, as the Wall Street Journal reported, customers of its Cayman Islands branch have been unable to access their funds since SVB's collapse.

According to the FDIC's website, there were 564 bank failures from 2001 through 2023. Bank failures dropped off dramatically after 2010, with none in 2021 and 2022. However, the collapse of Silicon Valley Bank in March was the third-largest bank failure in United States history. It also represented the largest failure since the 2007–2008 financial crisis.

The crisis may not be over. A recent report suggests that half of US banks could be insolvent.

Source: Be in Crypto

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Warren Takunda

Economic

Traders' Opinions

The US housing market has been experiencing a series of ebbs and flows, and the latest data from the National Association of Realtors (NAR) highlights this ongoing trend. In April of 2023, existing home sales in the country witnessed a 3.4% month-on-month decline, reaching a seasonally adjusted annual rate of 4.28 million units. This figure represents the lowest level in three months and falls short of the forecasted 4.3 million units. Additionally, the total housing inventory surged by 7.2% from the previous month, resulting in a 2.9-month supply at the current sales pace. Amidst these market shifts, the median existing-home price for all housing types experienced a 1.7% year-on-year decrease, settling at $388,800.

Home Sales Struggles

The recent dip in existing home sales may raise concerns among market observers, but it's important to note that sales remain above recent cyclical lows. The US housing market has been influenced by a combination of factors, including job gains, limited inventory, and fluctuating mortgage rates over the past several months. These dynamics have created an environment of push and pull, affecting the overall housing demand.

Inventory Expansion

One significant development in April was the substantial increase in the total housing inventory, which now stands at 1.04 million units. This surge of 7.2% from the previous month suggests a potential easing of the supply shortage that has characterized the market in recent years. The current inventory level represents a 2.9-month supply at the current sales pace, up from 2.6 months in March. While the increase in inventory might provide buyers with more options, it remains to be seen whether this trend will be sustained in the coming months.

Regional Variations

The NAR report also sheds light on regional variations in the housing market. Median home prices experienced a decline of 1.7% compared to the previous year, with the national median price reaching $388,800. Interestingly, while prices rose in the Northeast and Midwest, they retreated in the South and West regions. These divergent trends indicate that localized factors, such as supply-demand dynamics and regional economic conditions, continue to shape the housing market landscape.

As we move forward, it is essential to closely monitor the interplay of various factors affecting the US housing market. While the recent dip in existing home sales and the rise in inventory could be seen as potential signals of market softening, the broader context of job gains and fluctuating mortgage rates must be considered. These factors create a dynamic environment of push-pull, where demand can be influenced by changing economic conditions.

Market participants, including prospective homebuyers and sellers, should carefully evaluate the regional dynamics impacting their respective markets. For buyers, the increased inventory might present opportunities to find the right property at a favorable price. Meanwhile, sellers may need to adjust their pricing strategies to remain competitive in areas where prices have retreated.

To stay updated on all economic events of today, please check out our Economic calendar

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Thomas

Economic

Japan's core consumer inflation stayed well above the central bank's 2% target in April and a key index stripping away the effects of fuel hit a fresh four-decade high, keeping alive expectations of a tweak to its massive stimulus this year.

The reading comes a few days after data showed the world's third-largest economy grew faster than expected in the first quarter on a post-COVID consumer rebound.

While raw material costs have peaked, a steady rise in services and food prices highlight broadening inflationary pressure that may prod the Bank of Japan (BOJ) to revise up this year's price forecast in July, analysts say.

"The BOJ will likely have little choice but to revise up its inflation forecast in July," said Ryutaro Kono, chief Japan economist at BNP Paribas. "With inflation expectations heightening, the chance of a policy tweak may be rising."

The nationwide core consumer price index (CPI), which excludes fresh food but includes energy items, rose 3.4% in April from a year earlier, data showed on Friday, matching a median market forecast and perking up from a 3.1% gain in March.

Services inflation accelerated to 1.7% in April from 1.5% in March, the data showed, suggesting that rising labour costs may be starting to feed into broader consumer inflation.

Food prices also jumped 9.0% in April from a year earlier, accelerating from 8.2% in March.

An index stripping away the effects of both fresh food and fuel - closely watched by the BOJ as a key barometer of domestic demand-driven price trends - rose 4.1% in April from a year earlier, marking the fastest annual pace since September 1981.

With inflation having stayed above its target for a year, markets are simmering with speculation the BOJ will soon phase out its massive stimulus that critics say is distorting markets and hurting financial institutions' profits.

A scheduled increase in household electricity bills from June, which was approved on Tuesday, may keep core consumer inflation around 3% until summer, said Taro Saito, an economist at NRI Research Institute.

"Looking ahead, we'll likely see more companies pass on rising labour costs reflecting recent hike wages," he said. "The key driver of inflation will shift to services from goods."

Ueda has stressed the need to keep ultra-loose policy until inflation is sustainably around 2% and accompanied by wage hikes.

He has also said core consumer inflation will slow back below 2% toward the middle of this fiscal year, though sustained price rises have put that view into some doubt.

A poll of analysts, released on Monday by think tank Japan Center for Economic Research, projects core consumer inflation to hit 2.3% in fiscal 2023. That is much higher than the BOJ's current projection of 1.8% made in April.

The BOJ next meets for a policy meeting on June 15-16. It will revise its growth and inflation estimates at a subsequent meeting on July 27-28.

Analysts polled by Reuters expect Tokyo core consumer inflation, considered a leading indicator of nationwide trends, to hit 3.3% in May. The data is due out on May 26.

Source: CNA

To stay updated on all economic events of today, please check out our Economic calendar

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Samantha Luan

Stocks

Asian shares nudged lower on Friday, weighed down by China and Hong Kong stocks due to concerns over the stuttering recovery in the world's second-biggest economy, although Japan's Nikkei clocked a near 33-year peak.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.20% but was set to eke out a gain of 0.19% for the week.

China shares fell 0.61%, while Hong Kong's Hang Seng index dropped as much as 1.8%, dragged down by tech stocks after Alibaba Group Holding Ltd, reported a lower-than-expected 2% rise in quarterly revenue.

Data in the week underscored that China's economy lost momentum at the beginning of the second quarter, stoking worries over the wobbly post-COVID-19 recovery.

Japan's Nikkei though continued its ascent, rising to its highest since August 1990, during the country's so-called bubble era.

Investor attention has been firmly on the negotiations over U.S. debt ceiling and increasing hopes that a deal could be reached sent U.S. shares higher overnight. E-mini futures for the S&P 500 rose 0.16%.

U.S. President Joe Biden and House of Representatives Speaker Kevin McCarthy, the top Republican in Washington, hope to finalise a deal on the debt ceiling after Biden returns from the Group of Seven meeting in Japan on Sunday.

"What makes things more complicated this year is that the Democrats and Republicans are so wide apart from each other ... negotiations will take a long time because each one is trying to get something out of those negotiations," said Alexandre Tavazzi, head of CIO office and macro research for Pictet Wealth Management.

Meanwhile, data overnight showed fewer-than-expected Americans filed initial jobless claims last week, lowering odds that the Federal Reserve will cut interest rates before year-end.

Hawkish rhetoric from Fed speakers continued with Dallas Fed President Lorie Logan and St. Louis Fed President James Bullard saying inflation was not cooling fast enough to allow the Fed to pause its interest-rate hike campaign.

Markets are now pricing in 36% chance of a 25-basis point hike when the Fed meets next month, compared with 10% chance a week earlier, CME FedWatch tool showed.

Focus will now switch to Fed Chair Jerome Powell's panel discussion later in the global day.

ActivTrades market analyst Anderson Alves said the hawkish narrative starkly contrasts with the message from May's Fed meeting, which signalled a high bar for future hikes, a sentiment that Powell seemingly did not discourage during the last news conference.

In the currency market, the yen strengthened 0.14% to 138.51 per dollar, but was near the six-month low of 138.75 it touched overnight.

Against a basket of currencies, the dollar rose 0.077% and was wedged near a two-month high. The euro was down 0.07% to $1.0761, while sterling was last trading at $1.2391, down 0.14% on the day.

The offshore yuan fell to 7.0677 per dollar, the weakest since Dec. 2. Analysts predict more weakness in the future and point to the Fed's policy as being the bigger driver than economic weakness at home.

U.S. crude fell 0.14% to $71.76 per barrel and Brent was at $75.78, down 0.11% on the day.

Spot gold eased 0.1% to $1,956.18 an ounce.

Source: Yahoo

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Warren Takunda

Commodity

Traders' Opinions

In the dynamic world of energy markets, natural gas has taken center stage once again as recent developments have led to unexpected shifts in supply and demand. The latest data from the Energy Information Administration (EIA) reveals that US natural gas stocks have risen less than expected, while prices have reached a two-month high. This article explores the factors behind these fluctuations and their implications for the energy industry and consumers.

US Natural Gas Stocks Miss Market Expectations

During the week ending May 12, 2023, US utilities added 99 billion cubic feet (bcf) of gas into storage, falling short of market expectations of a 108 bcf increase. This modest gain can be attributed to mild weather conditions, which suppressed both heating and cooling demand. In comparison, the corresponding week last year witnessed an increase of 87 bcf, while the five-year average stood at 91 bcf. Despite this, the current stockpile of 2.240 trillion cubic feet (tcf) remains substantial, surpassing the levels of the previous year by 521 bcf and exceeding the five-year average by 340 bcf. US Natural Gas Stocks Fall Short of Expectations, Pushing Prices to 2-Month High_1

US Natural Gas Stocks Fall Short of Expectations, Pushing Prices to 2-Month High_1

Supply Constraints Drive Prices to a 2-Month High

The limited increase in natural gas stocks, coupled with a reduction in supply and heightened demand, has contributed to a surge in prices. US natural gas futures rose by 6%, reaching over $2.5/MMBtu, the highest level seen in the past two months. One significant factor affecting supply has been the decline in gas exports from Canada. Wildfires in Alberta have forced the shutdown of oil and gas production, disrupting pipeline flows and leading to near a 25-month low in gas exports to the US.

Rising Demand and Meteorological Outlook

The recent price surge has also been fueled by anticipated warmer-than-normal temperatures across the United States in the coming weeks. Meteorologists predict an increase in cooling demand as households and businesses seek relief from higher temperatures. This uptick in demand for natural gas, primarily used for electricity generation and cooling, has further contributed to the upward pressure on prices.

Declining LNG Exports and Maintenance Works

While supply constraints have been prominent, it is worth noting that gas flows to major US liquefied natural gas (LNG) export plants have decreased from record levels observed in April. Several facilities have undergone maintenance work, resulting in reduced export volumes. However, as these maintenance activities conclude, exports are expected to ramp up once again, potentially alleviating some of the supply pressures.

The recent developments in the natural gas market carry both benefits and challenges. Higher prices can lead to increased profitability for natural gas producers, bolstering investment in exploration and production activities. However, for consumers, elevated natural gas prices may translate into higher electricity bills, especially during the summer months when cooling demand peaks. Industries relying on natural gas as a feedstock or energy source may also face cost pressures, potentially impacting their competitiveness and profitability.

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Owen Li

Commodity

Top U.S. winter wheat grower Kansas is having a nightmare season amid exceptional drought, and the annual Wheat Quality Council tour confirmed that Thursday, issuing its lowest winter wheat yield estimate since at least 2000.

However, U.S. government forecasts typically have an edge over those from the tour at this point in the year.

This year's heavily watched tour estimated the Kansas winter wheat yield at 30 bushels per acre, well below the five-year tour average of 45.6 but slightly above the U.S. Department of Agriculture's week-ago estimate of 29 bushels per acre.

The Kansas wheat tour and its findings always prompt these questions: How does the tour yield compare with USDA's May forecast? How does the tour yield compare with final? How does USDA's May forecast compare with the final? Is USDA or the tour closer to the final in May?

USDA May versus tour stands out most. Since 2005 and including 2023, USDA's May estimate for Kansas winter wheat yield was lower than the tour yield in all but three years: 2010, 2018 and 2019.

USDA and the tour came up with the same yield in May 2018. USDA was only slightly higher than the tour in the other years, the largest margin being 2019's 4%. But USDA's margins to the downside were almost always bigger, the largest coming in 2021, when its May yield was 17% lower than the tour's.

Stacking up Dismal Kansas Wheat Tour Forecast Against History, USDA_1

Before 2021, the tour was always held before USDA's May report, but it now takes place after. The fact there was a huge difference between USDA and the tour in May 2021 suggests USDA's forecast might not bias the scouts. But it is something to consider going forward.

Compared with final Kansas winter wheat yields, the tour yields have been streaky. Final yield has landed below the tour forecast for the last two years, but it came in higher in the previous five years. Between 2011 and 2014, final yield was lower than the tour.

Stacking up Dismal Kansas Wheat Tour Forecast Against History, USDA_2

Final Kansas wheat yield has come in higher than USDA's May forecast in 11 of the last 15 years. That analysis includes 2020, but USDA's 2020 estimates are not being compared with the tour, which was cancelled that year.

Stacking up Dismal Kansas Wheat Tour Forecast Against History, USDA_3

In the 22 tours between 2000 and 2022, the tour yield was closer to the final than USDA's May estimate only seven times, most recently in 2015, 2016 and 2017. The other four instances were 2000, 2002, 2004 and 2009.

A connection among those years is not immediately clear. Winter wheat yield in Kansas was about 17% below the long-term trend in both 2015 and 2002, though 2016 featured a yield 27% above trend and 2017 was 6% above.

USDA's May 2023 estimate would put Kansas winter wheat yield 39% below trend, the worst in at least four decades but comparable to 37% below in 2014. Only 10% of Kansas wheat was considered good or excellent as of Sunday, tied for the worst rating for any week since 1989.

USDA last week pegged the 2023 Kansas winter wheat crop at 191.4 million bushels, the state's smallest since 1963 despite an 11% increase on the year in plantings to a seven-year high. Farmers are seen harvesting only 81% of those for grain, the lowest fraction since 1996.

Source: Reuters

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FastBull Featured

Daily News

【Quick Facts】

1. Japanese inflation remains high again, putting pressure on BoJ.

2. Fed hawks are open to raising interest rates in June.

3. McCarthy: The House of Representatives is expected to vote on the debt ceiling deal next week.

4. European natural gas futures prices break 30 euros.

5. Jefferson: will focus on the employment report and CPI report.

【News Details】

1. Japanese inflation remains high again, putting pressure on BoJ.

Japan's national inflation accelerated again in April, with the core CPI reaching 4.1%, the highest level since the 1980s. Japan's CPI data in April will likely confirm the initial and somewhat worrying signals from Tokyo's April CPI data that cost-push inflationary pressures are heating up again. That would be enough to prompt the BoJ to raise its inflation expectation again after raising it in April, which would be a step toward ending its negative interest rate policy. Japan's Tokyo CPI data for May, which will be released next Friday, is also expected to further confirm the stronger inflation, which means that the BoJ's meeting in June will be closely focused.

2. Fed hawks are open to raising interest rates in June.

Dallas Fed President Logan and St. Louis Fed President Bullard had a speech yesterday:

Data in the coming weeks showed that no rate hike in June might be appropriate, but it was too early to make a decision, Logan said. While inflation is down from last year's peak and the economy is generally as unbalanced as it once was, we haven't made the progress that we need on inflation.

St. Louis Fed President Bullard said in an interview with the Financial Times that progress on inflation has been slow and further rate hikes may be needed to provide some insurance that we can make inflation under control.

It is obvious that Logan and Bullard are open to raising rates at the June meeting. This also raised the market's interest rate hike expectations. After the speech, CME FedWatch Tool showed that the chance of the Fed raising interest rates in June rose to 36.2%.

3. McCarthy: The House of Representatives is expected to vote on the debt ceiling deal next week.

House Speaker McCarthy said that the House is expected to vote on the debt ceiling deal next week, which is a positive signal so far on the progress of debt ceiling talks. McCarthy said that five negotiators were still discussing the size of the cuts, as well as the size of the debt ceiling increase or the time of the debt ceiling removal. Negotiations are conducted 2-3 times a day and there is already a "structure".

4. European natural gas futures prices break 30 euros.

European gas futures have dropped below 30 euros for the first time since June 2021, a sharp contrast to last year's market turmoil and a sign of tepid demand as Europe emerges from its energy crisis. The region has built up large inventories after a mild winter as it previously rushed to import LNG and limited consumption. However, demand remained weak amid an uncertain economic outlook and seasonal factors. The current recovery has been uneven across the region and some gas users are still constrained by energy contracts that were made when prices were higher, meaning that the easing of costs may be delayed.

5. Jefferson: will focus on the employment report and CPI report.

Fed Governor Jefferson said in his speech yesterday that in the coming weeks, when the Fed considers the appropriate stance of future monetary policy, it will consider the employment report and the CPI report in May. He also said monetary policy should be forward-looking and data-dependent.

History has shown that the lag time of monetary policy is long and variable, and one year is not enough for demand to be fully affected by a rate hike. Another factor is the previously mentioned uncertainty about tightening lending standards. He intended to consider all of these factors in the coming weeks while considering the appropriate stance of future monetary policy.

【Focus of the Day】

UTC+8 20:30 Canada Retail Sales (Mar)

UTC+8 20:45 Speech by New York Fed President Williams

UTC+8 21:55 Speech by ECB Executive Member Schnabel

UTC+8 23:00 Fed Chairman Powell and Former Chairman Bernanke Attend a Panel Discussion on Monetary Policy

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