Global banking turbulence prompts Wall Street banks to trim hawkish Fed bets

Bets of a 50 basis points rate hike at the start of the month following evidence of sticky inflation in a tight labor market and hawkish rhetoric from Fed Chair Jerome Powell have been dramatically altered by the collapse of two mid-sized U.S. banks and troubles at Credit Suisse.

A Swiss-backed takeover of Credit Suisse by peer UBS has helped calm some contagion fears but broader ramifications of the deal are yet to be seen. Across the Atlantic, U.S. regulators and the Fed set up lending programs and brokered deals to support regional banks. "Markets appear to be less than fully convinced that efforts to support small and midsize banks will prove sufficient. We think Fed officials will therefore share our view that stress in the banking system remains the most immediate concern for now," said Jan Hatzius, chief economist and head of research at Goldman Sachs.

Goldman now expects the U.S. central bank to keep its target rate unchanged in the 4.5%-4.75% range, compared with its earlier expectation of a 25 basis points hike. Peer Citigroup sees aMoney markets have increasingly added bets toward a pause. Odds were almost equally split between a pause and a 25 bps hike, as of 10:54 a.m. ET.

Barclays has changed its view multiple times. The brokerage started with a 50 bps hike and then changed to a pause following the collapse of SVB Financial. It now sees a 25 basis points hike.Terminal rate forecasts have also swiftly come down. While some banks still see itpressed ahead with a 50 bps hike despite calls for a smaller cut or a pause in the face of stresses in the banking sector. Major investment banks now expect the ECB to deliver a 25 bps hike in May.

CIBC Scotia bank has tons of us treasuries. if people run them. they are forced to sell at a massive loss.... combined with mortgage defaults and car loan/leasing. they sure can go under and fast. I got my money out

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