The problems at SVB underscore how a campaign by the U.S. Federal Reserve and other central banks to fight inflation by ending the era of cheap money is exposing vulnerabilities in the market. The technology sector has been hit hard in the past few months and stress has appeared in other corners of the market as rates rise.
“The volatility we are seeing among some of the banks is a reminder that sharp increases in interest rates will increase areas of fragility,” said Ronald Temple, chief market strategist at Lazard. Sources familiar with the situation said on Thursday that some startups had advised their founders to pull out their money from SVB as a precautionary measure.Banks typically invest heavily in government bonds, in particular those of their home country. Rising interest rates have caused the price of such bonds to fall, feeding investor concerns that other banks might also be vulnerable.
But banking experts said SVB’s issues were unique and the worries about the broader sector were not warranted.
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