PacWest Bancorp and other regional banks were rising in early Friday trading. But the lenders still can’t seem to shake off turmoil that has dogged them since Silicon Valley Bank collapsed in March.
PacWest (ticker: PACW) was rising 2.8% in Friday’s premarket session. Western Alliance (WAL) rose 3.6%, and Zions Bancorp (ZION) advanced 2%.
On Thursday, PacWest dropped almost 23% after it reported that deposits had fallen about 10% since the failure of First Republic Bank on May 1. PacWest, like other regional lenders, have been trying to overcome persistent doubts about their health after others succumbed to pressure from falling asset values and the flight of customers.
The good news for the value of the bonds on their books is that inflation data came in a little lower than expected this week, adding to expectations that the Federal Reserve will pause its interest-rate hiking campaign next month. Rate hikes tend to drive down asset prices as investors demand a higher rate of return on bonds.
More bad news could come in the shape of stalled talks over the debt ceiling, with a looming deadline of June 1. Republicans in Congress have been threatening to allow the U.S. to default on its obligations by refusing to lift the debt ceiling. Democrats are insisting that that discussion should be a part of the normal budgeting process. If there is a credit event, the value of U.S. government bonds could tank, which might further upend banks.
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