May 1, 2023 - Economy

When the market knew First Republic would fail

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

The markets knew that First Republic would fail, as the chart of one of the bank's bonds demonstrates.

Why it matters: By the time markets closed on Friday, they had priced in First Republic's failure as a near-certainty.

By the numbers: Before the failure of Silicon Valley Bank on March 10, First Republic's 4.625% bond maturing in Feb. 2047 traded normally, steadily declining in price as interest rates rose.

  • Then there was a sudden plunge on fears that First Republic would be the next shoe to drop, followed by a rally when JPMorgan and 10 other banks deposited $30 billion at First Republic in a unified show of support, followed by further deterioration as deposits kept on flowing out.
  • The bond was trading at about 48 cents on the dollar as of Friday April 21 — pricing in a likely but not certain default. A week later it was at 15 cents. Today, it's largely worthless.
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