Rescued Amid Turmoil: First Republic Bank receives $30B Influx

By Solve Fixed Income With nearly two thirds of their deposits uninsured by the FDIC, Moody’s placed First Republic Bank on a downgrade watch earlier this week. To stabilize First Republic Bank’s deposits, several of the industry’s largest firms, including Wells Fargo, BofA, JPMorgan and Citigroup stepped in with $30B. This influx of cash took place shortly after Janet Yellen met with JPMorgan CEO Jamie Dimon yesterday. The effects of the recent turmoil can be illustrated by the price of First Republic Bank’s 4.375% notes due 2046. The collapse of Silicon Valley Bank saw bond prices plummet just over a week ago and the recent influx of cash has created a bounce back of about 10% (Figure 1).

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On the lead up to the bailout of First Republic Bank, investor speculation and market interest on the bank’s bonds peaked as the bid/offer spreads and quote volume for their corporate bonds sprung to record levels (Figure 2).

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