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Futures Slide As $2.9 Trillion OpEx Chaos Clashes With Broke Bank Bailout Bash

Futures Slide As $2.9 Trillion OpEx Chaos Clashes With Broke Bank Bailout Bash

Similar to Thursday, futures faded an earlier gain which pushed…



Futures Slide As $2.9 Trillion OpEx Chaos Clashes With Broke Bank Bailout Bash

Similar to Thursday, futures faded an earlier gain which pushed emini futures briefly above 4000 after the index rallied 1.8% yesterday, as investors were assessing whether a $30BN "deposit injection" rescue package for First Republic Bank is enough to ease the risk of financial contagion, with gains reversing after news that China was cutting its bank reserve ratio and injecting over $70BN in liquidity, which was viewed by the jittery, suspicious market that there may be more unpleasant surprises in the banking sector this time in China which was moving to "ringfence its banking sector." US equity-index futures dropped 0.3%, reversing a similar gain, while the Stoxx Europe 600 index pared an advance and turned negative. A gauge of European banking stocks is heading for a drop of almost 9% this week. Nasdaq 100 futures were flat as the rates-sensitive gauge heads for its best week since November amid expectations the Federal Reserve will temper its tightening path. The 10-year Treasury yield fell eight basis points and a gauge of the dollar declined.

As detailed yesterday, as if the bank bailout bonanza, a larger than expected TLTRO repayment in Europe and China's RRR cuts weren't enough, traders are facing fresh turmoil by today’s $2.9 trillion options expiration after a week of bank drama. Such quad-witching days typically involve portfolio adjustments, spikes in volume and price swings, especially on day so near-record low liquidity such as these.

Financial stocks were lower in premarket trading Friday, in line with the broader market, as doubt persists around First Republic Bank despite a $30 billion rescue effort from large lenders and federal regulators. First Republic’s slide continues since market close Thursday, as the California bank discloses its borrowing from the Fed ranged from $20 billion to $109 billion in the last week while billionaire investor Bill Ackman warned the effort to rescue FRC was creating a “false sense of confidence" a remarkable U-turn from him begging for a bailout of SVB. First Republic Bank and PacWest Bancorp are among the most active financial stocks in early premarket trading, falling 11.9% and 4.7%, respectively.  FedEx Corp. shares jumped in premarket trading after the parcel company boosted its profit guidance, beating the average analyst estimate. Nvidia Corp. gained slightly as Morgan Stanley upgraded the biggest US chipmaker to overweight from equal-weight. Here are some other notable premarket movers:

  • US Steel shares rise 5.6%, with analysts saying the company’s new first-quarter earnings guidance was much better than anticipated.
  • Baidu shares rise 5% in US premarket trading after the Chinese search-engine operator’s newly debuted AI chatbot gained positive reviews from analysts. Other AI-exposed stocks are also higher in premarket trading, with (AI US) +3%, (BBAI US) +8.5%, SoundHound AI (SOUN US) +7.1%.
  • Cryptocurrency-exposed stocks rose after Bitcoin extended its gains for a second consecutive session, rising back above the $26,000 threshold. Hive Blockchain (HIVE US) climbed 8.7%, Hut 8 Mining (HUT US) +5.8%, Marathon Digital (MARA US) +5.4%, Riot Platforms (RIOT US) +5.7%, Stronghold Digital (SDIG US) +5.1%.
  • Keep an eye at FMC Corp. stock as it was upgraded to buy from neutral at Redburn, which cites “strong” pipeline-driven growth and an expected further increase in the crop chemical producer’s “industry- leading” margins.

Investors are recovering from a turbulent week that began with banking-sector concerns driving the VIX index of stock volatility to the highest since October and pushing the S&P 500 to the lowest in more than two months. Friday’s quarterly so-called triple witching — where contracts for index futures, equity index options and stock options all expire — could amp up swings in trading. The failure of Silicon Valley Bank prompted the US government to step in, and banks borrowed a combined $164.8 billion from two Federal Reserve backstop facilities in the most recent week.

While that demand for emergency liquidity shows continued caution, the overall rescue efforts have eased the risk of a broader banking-sector contagion, according to Richard Hunter, head of markets at Interactive Investor. “The generally swift and decisive actions which have been taken have removed some of the sting from market volatility,” he said.

“We do not expect a full-blown financial crisis, but one must not dismiss the underlying dynamics,” said Karsten Junius, the chief economist at Bank J Safra Sarasin AG. “Financial conditions will most likely tighten further and increase recession risks. We therefore advocate a defensive positioning with regard to risk assets and a tactically cautious stance on the banking sector, even though the constructive case for banks remains intact over the medium to longer term.”

Bank of America strategist Michael Hartnett said investors should sell any rally in stocks as fund flows don’t yet reflect deep enough concern about a looming recession. The strategist, who correctly warned of a stock exodus in 2022, recommended selling the S&P 500 above 4,100 points, about 3.5% above its last close.

The Stoxx Europe 600 index erased an advance with energy, miners and tech the best-performing sectors. A gauge of European banking stocks is heading for a drop of more than 9% this week as yet another early rally lost steam Friday. Shares in Credit Suisse resumed a decline, falling as much as 10% as the idea of a forced combination with a larger rival UBS Group AG was shot down. The stock had rallied almost 20% Thursday after the Swiss central bank stepped in with support. Bonds across Europe gained, with Germany’s 10-year yield down 10 basis points. Here are the most notable European movers:

  • European mining stocks rebound from two sessions in the red, with copper, aluminum and steel-exposed names leading the bounce, and Glencore gaining 4.2% as of 10:32 a.m. CET
  • European logistics and freight stocks gain, after US peer FedEx’s results beat expectations and it upgraded its forecast, sending its shares surging in postmarket trading
  • Telenor shares rise as much as 3.2%, after a Financial Times report that CK Hutchison is in talks with the Nordic telecom operator about merging their operations in Denmark and Sweden
  • Webuild shares rise as much as 8.1% to add to a 12% post-earnings jump in the prior session, with Akros raising the Italian construction firm to accumulate from neutral
  • Nel shares gain as much as 6%, the most since Feb. 7, as Goldman Sachs raises the Norwegian electrolyzer firm to buy, from neutral, on an increasingly strong growth outlook
  • Enel shares gain as much as 2.4% in early trading. The Italian utility’s FY net income is ahead of expectations, while guidance on its debt and dividend looks robust, analysts say
  • LSE Group shares rise as much as 3% as UBS upgrades the exchange operator to buy from neutral, saying the risk-reward on the stock is “very favorable”
  • Credit Suisse fell as investors examine its prospects after a central bank backstop. The firm and UBS are opposed to a forced combination, Bloomberg News reported

Earlier in the session, Asia stocks rebounded, led by Hong Kong-listed shares as risk appetite was helped by a rescue package for First Republic Bank. The MSCI Asia Pacific Index advanced as much as 1.6%, reversing Thursday’s drop. Hong Kong’s Hang Seng China Enterprises Index jumped more than 2%, leading indexes in the region, as Baidu drove China’s artificial intelligence stocks higher after brokers tested its ChatGPT-like service.  China’s central bank announced an unexpected cut to its reserve requirement ratio after domestic markets closed. Gains in Asia were broad-based with most markets in the green, after the biggest US lenders agreed to contribute $30 billion in deposits to First Republic. Bank stocks rose as jitters about the health of the US financial system and economy eased.  The MSCI Asia gauge was still on track for a second straight week of losses, albeit with smaller declines, as rolling headlines on troubled lenders from Silicon Valley Bank and Signature Bank to Credit Suisse Group AG led to choppy trading. The stock measure came close to entering correction territory prior to Friday’s rebound, with markets also digesting a 50-basis-point rate hike by the European Central Bank ahead of the Federal Reserve’s meeting next week. Shares in Taiwan, South Korea and the tech hardware sector “have over-delivered” this year and are looking particularly vulnerable to shockwaves from the US banking stress, according to Goldman Sachs Group

Japanese stocks rose, following US peers higher, as sentiment improved after Wall Street banks stepped in to rescue First Republic Bank.  The Topix Index rose 1.2% to 1,959.42 as of market close Tokyo time, while the Nikkei advanced 1.2% to 27,333.79. Sony Group Corp. contributed the most to the Topix Index gain, increasing 3.5%. Out of 2,159 stocks in the index, 1,567 rose and 509 fell, while 83 were unchanged. Japan equities were also buoyed by growth stocks, which “are outperforming value stocks today, especially tech stocks,” said Rina Oshimo, a senior strategist at Okasan Securities. Meanwhile, the European Central Bank went ahead with a planned half-point rate hike. “The reality of overseas banking problems is still unclear,” said Hajime Sakai, chief fund manager at Mito Securities. “While U.S. seems to be calming down, outlook in Europe remains uncertain.”

Key stock gauges in India advanced on Friday but registered their third weekly drop in four amid risk-off sentiment triggered by worries over global growth and future course of interest rates. The S&P BSE Sensex rose 0.6% to 57,989.90 in Mumbai, while the NSE Nifty 50 Index advanced 0.7% to 17,100.05. For the week, the Nifty 50 fell 1.8%, while the BSE Sensex declined 1.9%. Indian stocks have sharply underperformed Asian and emerging markets, both today and for the week, as investor concerns persist over the South Asian country’s relatively high valuations and slowing growth momentum. HDFC Bank contributed the most to Sensex’s gain, increasing 1.4%. Tata Consultancy Services was among the worst performing NIFTY IT stocks, and underperformed most of its listed Indian peers, as its CEO’s sudden resignation surprised investors.  Out of 30 shares in the Sensex index, 21 rose and 9 fell.

In FX, the Dollar Index is down 0.2% as the greenback falls versus all its G-10 rivals to head for a weekly. The New Zealand dollar and Australian dollar are the best performers. US overnight indexed swaps are now pricing for an 80% probability of a quarter-percentage point Fed rate hike next week, up from a coin toss earlier this week.

In rates, treasuries have recouped some of Thursday’s losses, led by bunds and gilts as euro-zone money markets trim rate-hike premium for May after Thursday’s post-ECB selloff. Intermediate sectors lead a limited advance for Treasuries as US stock futures hold most of Thursday’s steep gains. Two-year US yields fell 3bps to 4.11% while the 10-year rate slipped seven basis points to 3.49% vs Thursday’s close and paced by bunds and gilts. Fed-dated OIS contracts price around 20bp of rate-hike premium for next week’s policy decision, in line with Thursday’s close, while around 75bp of rate cuts are priced from May peak into year-end.

Oil headed for the biggest weekly decline this year after investor confidence plunged following the worst banking sector turmoil since the financial crisis. WTI futures in New York were down about 10% this week, even though they edged higher by 1.6% to trade near $69.40 to pare some of the decline. The failure of Silicon Valley Bank and troubles at Credit Suisse Group AG, compounded by oil options covering, triggered a three- day rout earlier this week that sent prices to the lowest in 15 months. Gold is headed for its biggest weekly gain since November after attracting haven demand due to banking turmoil in the US and Europe. U.S. Steel is among the most active resources stocks in premarket trading, gaining about 4%. 

Looking to the day ahead now, and data releases from the US include the University of Michigan’s consumer sentiment index for March, industrial production for February, and the Conference Board’s leading index for February. Over in Europe, we’ll get the final Euro Area CPI reading for February. Lastly, central bank speakers include the ECB’s Simkus.

Market Snapshot

  • S&P 500 futures down 0.3% to 3,981
  • STOXX Europe 600 up 1.0% to 446.26
  • MXAP up 1.4% to 157.20
  • MXAPJ up 1.5% to 506.60
  • Nikkei up 1.2% to 27,333.79
  • Topix up 1.2% to 1,959.42
  • Hang Seng Index up 1.6% to 19,518.59
  • Shanghai Composite up 0.7% to 3,250.55
  • Sensex up 0.4% to 57,866.02
  • Australia S&P/ASX 200 up 0.4% to 6,994.80
  • Kospi up 0.7% to 2,395.69
  • Brent Futures up 0.7% to $75.22/bbl
  • Gold spot up 0.5% to $1,929.89
  • U.S. Dollar Index down 0.33% to 104.07
  • German 10Y yield little changed at 2.25%
  • Euro up 0.4% to $1.0653
  • Brent Futures up 0.7% to $75.22/bbl

Top Overnight News from Bloomberg

  1. China cut the amount of cash banks must keep in reserve at the central bank in an effort to support lending and strengthen the economy’s recovery from pandemic restrictions and a property market slump: BBG
  2. Central bank interest-rate hikes really started hitting home this week: BBG
  3. Banks borrowed a combined $164.8 billion from two Federal Reserve backstop facilities in the most recent week, a sign of escalated funding strains in the aftermath of Silicon Valley Bank’s failure: BBG
  4. If there’s one lesson from the European Central Bank’s latest monetary policy meeting, it’s that bond market volatility is here to stay: BBG
  5. China's Xi Jinping will visit Moscow next week for talks with Russian President Vladimir Putin, showcasing the deepening ties between the countries. WSJ
  6. TikTok said that the Biden administration was pushing the company’s Chinese owners to sell the app or face a possible ban. But there are probably few companies, in the tech industry or elsewhere, willing or able to buy it, analysts and experts say. NYT
  7. ECB officials (including Muller, Simkus, and Kazimir) deliver hawkish comments, warning that rates still have further to go on the upside. BBG
  8. Banks borrowed a combined $164.8 billion from two Fed facilities in the week ended March 15, a sign of escalated funding strains. Discount window borrowing shot up to $152.85 billion, eclipsing the prior all-time high of $111 billion in 2008. Another $11.9 billion was borrowed from the new emergency backstop launched Sunday known as the Bank Term Funding Program. BBG
  9. The US is committed to replenishing the Strategic Petroleum Reserve but won’t rush to do so immediately despite the recent decline in oil prices, a top Biden administration official said. BBG
  10. Poland will send four of its MiG fighter jets to Ukraine in the coming days in what amounts to the first shipment of combat aircraft to the Zelensky gov’t. FT  
  11. Fresh turmoil for traders may be sparked by today's options expiration after a week of bank drama. An estimated $2.7 trillion of derivatives contracts tied to stocks and indexes will mature, typically involving portfolio adjustments, spikes in volume and price swings. Demand for bearish options has been on the rise and market makers will be "short gamma," requiring them to ride the prevailing trend. BBG
  12. PacWest Corp is in talks about a liquidity boost with Atlas SP Partners and other investment firms. RTRS
  13. Charles Schwab saw $8.8 billion in net outflows from its prime money market funds this week as investors rattled by turmoil at US banks plowed even more money into the brokerage’s other portfolios that favor assets with government backing. BBG

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks were positive amid the improved global risk appetite after recent bank lifelines including the SNB liquidity backstop for Credit Suisse and with large US banks teaming up to deposit USD 30bln in First Republic Bank. ASX 200 was marginally higher with the index kept afloat amid outperformance in energy and as the top-weighted financial industry benefitted from the recent banking sector relief, although gains were limited by losses in real estate and the defensive sectors. Nikkei 225 made headway above the psychological 27,000 level with railway stocks among the top gainers, while automakers lagged at the opposite end of the spectrum. Hang Seng and Shanghai Comp. were in an upbeat mood as energy and tech spearhead the advances in Hong Kong and with Baidu eyeing double-digit percentage gains, while the mainland also benefitted from the PBoC’s continued liquidity efforts.

Top Asian News

  • China Securities Journal noted that the Chinese economy requires more fiscal and monetary support, as well as reiterated that the economic rebound is not yet solid.
  • Japan's government and BoJ will hold a meeting on Friday evening after the SVB collapse, with the MoF, FSA and BoJ poised to exchange information on financial markets, according to Nikkei.
  • Japanese Finance Minister Suzuki said Japanese financial institutions have ample capital base and liquidity, while the financial system is stable as a whole. Suzuki added they are closely coordinating with the BoJ and other central banks regarding responding to financial situations.
  • Japanese Union Rengo says overall wages to rise 3.8% in Spring wage talks.

European bourses are firmer across the board, Euro Stoxx 50 +0.4%, as recent liquidity action settles sentiment on Quad Witching Friday. Sectors, are all in the green with the defensively-inclined names lagging and upside in Basic Resources and Banking names, SX7P +0.4%; note, Credit Suisse has dropped into negative territory despite opening in the green. Stateside, futures are essentially unchanged having eased from initial best levels around the European open ahead of Michigan data and as attention turns to the upcoming FOMC.

Top European News

  • UK Chancellor Hunt abandoned plans for sovereign wealth funds to pay corporation tax on property and commercial enterprises, according to FT.
  • Negotiations for the UK's re-entry into the EU's Horizon research scheme may begin within weeks following a resolution, in principle, of the post-Brexit Northern Ireland dispute, according to BBC's Parker.
  • German Chancellor Scholz said he does not see the threat of a new financial crisis and the monetary system is no longer as fragile as it was before the financial crisis, according to Handelsblatt. It was also reported that Germany's Economy Ministry said a technical recession can now no longer be ruled out.


  • The USD is subdued, though has convincingly reclaimed the 104.00 mark after dropping to a 103.89 low earlier; action which comes to the benefit of G10 peers.
  • Antipodeans are the stand-out outperformers given their high-beta status amid the improvement in risk appetite, though NZD/USD peaked above 0.6250 and AUD/USD failed to surpass the 0.6720 21-DMA convincingly.
  • Other G10s are deriving upside, though magnitudes slightly less pronounced, with USD/JPY holding above 133.00, Cable above 1.21 and EUR around 1.0650.
  • Yuan saw some modest, but ultimately shortlived, pressure on the PBoC's 25bp cut while the Scandis are benefitting from risk, though the SEK less so given unfavourable unemployment data.
  • PBoC set USD/CNY mid-point at 6.9052 vs exp. 6.9017 (prev. 6.9149).

Fixed Income

  • EGBs are markedly more contained thus far, though Bunds have still posted a +100tick range and are currently holding near 136.40 with the 10yr yield around 2.25%.
  • EGBs have largely disregarded numerous ECB speakers, who overall have added little, and the final EZ HICP reading for February while Gilts are following suit given a lack of specific drivers ahead of next week's BoE.
  • Stateside, the direction and magnitude of price action is in-fitting with the above though the US yield curve is slightly mixed with the short-end a touch firmer and the long-end end dipping slightly.


  • Commodities are, generally, deriving support from the firmer risk tone and as the USD remains under pressure; with the crude benchmarks choppy but most recently extending to incremental session highs.
  • Albeit, this upside places WTI Apr'23 just USD 0.30/bbl above USD 69.00/bbl and as such well within the week's USD 65.65-77.47/bbl parameters.
  • Spot gold is similarly bid and at the top-end of USD 1918-1934/oz ranges, with base metals benefitting from the improved tone though the complex is still in the red for the week.
  • OPEC+ delegates are reportedly still encouraged by Asian demand; Delegates largely blame the recent sell-off on speculative money leaving the derivatives oil market rather than weakness in the physical market, according to Bloomberg.
  • US energy envoy Hochstein said US President Biden is committed to replenishing the petroleum reserve.
  • China to lower retail fuel prices from Saturday, according to NDRC.
  • Increasing oil demand from China has lifted shipping costs markedly, via WSJ; highlighting that the daily chartering cost for VLCC has roughly doubled MM.
  • Russia's Kremlin said Russia is extending the Black Sea grain deal for 60 days.
  • China is reportedly mulling efforts to maintain iron ore supply and prices, according to NDRC; warn iron ore trading firms to avoid hoarding and price gouging.


  • North Korea said its missile launch on Thursday was a Hwasong-17 ICBM which sent a warning to enemies and proved the capability to respond overwhelmingly if needed. North Korea added its launch was a response to US-South Korea military drills and its leader Kim called for boosting deterrence of nuclear war, while it noted the launch did not have any negative impact on the safety of neighbouring countries, according to NK News and KCNA.
  • Chinese President Xi is to visit Moscow on March 20-22, according to state media; Both presidents are set to sign "important documents", and discuss strategic partnership, according to Tass.
  • Russia's Kremlin said President Putin and President Xi will meet on March 20th, hold negotiations on March 21st, and there will be a press statement.
  • German Federal Education/Research minister is to visit Taipei, Taiwan on Tuesday, via FT citing sources; Foreign Minister Baerbock intends to visit Beijing, China in April/May.

US Event Calendar

  • 09:15: Feb. Industrial Production MoM, est. 0.2%, prior 0%
    • Feb. Manufacturing (SIC) Production, est. -0.3%, prior 1.0%
    • Feb. Capacity Utilization, est. 78.4%, prior 78.3%
  • 10:00: March U. of Mich. Expectations, est. 64.8, prior 64.7; Current Conditions, est. 70.5, Sentiment, est. 67.0,
    • U. of Mich. 1 Yr Inflation, est. 4.1%, prior 4.1%
    • U. of Mich. 5-10 Yr Inflation, est. 2.9%, prior 2.9%
  • 10:00: Feb. Leading Index, est. -0.3%, prior -0.3%

DB's Jim Reid concludes the overnight wrap

Some optimism has returned to markets over the last 24 hours, with bank stocks stabilising on both sides of the Atlantic and 2yr yields surging back. Even the ECB’s decision to pursue a 50bp hike went without incident, and investors grew in confidence that the Fed would follow up with their own 25bps hike next week, so we’re starting to see a modest change in the mood music. It's also telling this morning that in Asia, US yields and equity futures are fairly stable. Well, they were at the time of typing.

As we'll see below, the concerns haven't gone away though, as while Credit Suisse saw its equity price increase, its bonds/CDS were generally flat to weaker. Let's start with the US banks as there was a lot of news surrounding First Republic Bank. The equity opened down a further -12% taking it to its lowest levels since going public, before recovering slowly as reports started filtering out about additional capital injections. Following numerous reports early yesterday that the US government was trying to agree to a rescue package with some of the major US banks, a deal was announced just before the US equity market closed. In a joint statement the consortium of banks including JPMorgan, Citigroup, Bank of America and Wells Fargo tried to reassure the public that their actions, “reflects their confidence in First Republic and in banks of all sizes.” Overall 11 banks are contributing $30bn of uninsured deposits to First Republic, with $5bn coming from JPMorgan, Citigroup, Bank of America and Wells Fargo. The banks' commitment will extend for 120 days initially and could be extended at that point as necessary. In after-hours trading, First Republic's shares fell c.-17% as the bank announced that it was suspending its dividend and plans to trim its debt burden. That leaves the stock nearer to where it was trading prior to the news of the deposit injection but still higher.

In terms of bank funding, last night the Fed released the weekly data of how its various lending facilities were used in the week ending March 15. The most anticipated release of the data since Covid did not disappoint in scale. In total, there was $164.8bn of borrowing between the Fed’s discount window ($152.85bn) and the Bank Term Funding Program ($11.9bn) that the Fed announced last week. The discount window figure blows away the previous high of $111bn during the 2008 financial crisis. However, as a function of overall deposits level yesterday’s data was about 1% of deposits, while at the height of the GFC the discount window usage in a week was as much as 1.8% of deposits. This data will be parsed more in coming weeks if stress persists but the 11 bank consortium into First Republic will be hoped to be enough to prevent that.

Nevertheless, we shouldn’t get ahead of ourselves, and it’s worth remembering that we’ve already had a temporary period of stability on Tuesday that was then dented by the Credit Suisse worries on Wednesday. Indeed, their bonds stayed fairly stressed yesterday even with the market bounceback. The 5yr credit default swaps stayed around the +1000 level, whilst there were further declines in the value of their debt – notably their ’29 EUR bonds are trading under €70. That was in spite of the announcement we highlighted yesterday that they’d be using a SNB liquidity facility, which initially saw the share price surge +40% at the open, before paring back around half those gains to “only” close up +19.15%.

With regard to Credit Suisse, if you’re looking for the positives in European banking see my CoTD here yesterday that shows the rest of the sector is more tightly packed together in 5yr CDS terms and that CS has been an outlier for months. So if the authorities manage to contain it, the immediate contagion risk is limited. However, the CoTD also highlights how we think the financial risk will eventually spread to corporates. If relatively lowly levered financials can get hit then highly levered corporates won’t be immune further down the line with the appropriate lag. Our YE targets for US and EU HY for YE 2023 have been around 860bp for 12 months now, but with most of the pain expected to occur in H2 2023. Our US Lev Loan target is +1000bp for the same time period. If you're not on my CoTD (chart of the day), send an email to to get added.

Banks in aggregate recovered a bit yesterday, though the CS fallout continued to weigh as Europe’s STOXX Banks was up just +1.16% vs the -8.40% the day before. Meanwhile, the news of the further First Republic support saw the KBW Banks index up +2.57% - roughly 1.4% of that came after news hit that First Republic would get $30bn of deposits. We shouldn’t forget that both are still down more than -10% over the week as a whole, but the more positive tone supported a broader equity rally that left the S&P 500 (+1.76%) and Europe’s STOXX 600 (+1.19%) with solid performances on the day. That’s the best day for the S&P 500 in over 2 months and is entering today up +2.56% through the last four days, while the STOXX 600 is down -2.67% on the week so far.

Whilst all that was going on, the ECB followed through on their previous commitment to hike by 50bps at yesterday’s meeting, which takes the deposit rate up to a post-2008 high of 3%. President Lagarde said this was supported by a “large majority”, but in other respects the decision was a dovish one, and their statement dropped the previous guidance that they expected to raise rates further. Instead, the message was that they’d take a “data-dependent” approach at subsequent meetings, and there wasn’t much indication about what they were planning to do next. Their inflation forecasts (which were finalised before the current turmoil) were also revised down on the back of lower energy prices, and now see inflation falling from +5.3% in 2023 to +2.9% in 2024 and +2.1% in 2025. On the other hand, the core inflation forecast for 2023 was revised up to +4.6%, which shows that they still see underlying price pressures staying resilient.

When it came to the current turmoil, the ECB’s statement said that they were “monitoring current market tensions closely”, and it also affirmed that the “euro area banking sector is resilient, with strong capital and liquidity positions.” President Lagarde went on to deflect comparisons to 2008, saying that “the banking sector is in a much, much stronger position”. Looking forward, our European economists maintain their 3.75% baseline terminal rate call based around a 50bp hike in May and then 25bps in June. That view is predicated on the relatively rapid normalisation of the current global financial shock. Please see their report here for more.

With the ECB hike now delivered, there was a growing expectation among investors that the Fed would similarly follow through with a hike at their own meeting on Wednesday. Futures are now pricing in a +19.2bps move, which is a decent increase from the +11.8bps priced by the previous day’s close. In turn, that confidence led to a rebound in shorter-dated yields, with the 2yr yield up +27.0bps to 4.157%, and the 10yr yield also recovered +12.2bps to 3.577% although it is slightly lower (-2.26bps) in Asia as we go to press. In Europe it was much the same story, with yields on 10yr bunds (+16.0bps), OATs (+13.5bps) and gilts (+10.4bps) all rising. Another key factor behind that was growing scepticism that central banks were about to pursue substantial rate cuts this year. For instance, the futures-implied rate for the Fed’s December meeting rose by +40.7bps on the day to 4.097%, which demonstrates how rate cuts are starting to be priced out again.

The latest data has been far down the agenda lately, but the weekly initial jobless claims from the US for the week ending March 11 came in at 192k (vs. 205k expected). That’s a -20k decline on last week, which had seen the biggest weekly increase since September. Otherwise, the US housing data was more resilient than anticipated in February, with housing starts up by an annualised rate of 1.450m (vs. 1.310m expected), and building permits up by 1.524m (vs. 1.343m expected).

Asian equity markets are higher overnight. As I type, Chinese stocks are advancing with the Hang Seng (+1.85%) emerging as the top performer across the region while the Shanghai Composite (+1.58%) and the CSI (+1.57%) are also sharply higher. Elsewhere, the Nikkei (+1.20%) and the KOSPI (+0.67%) are also trading in the green as risk sentiment improved after the turmoil in the US and European banking sector eased. Outside of Asia, US stock futures are trading flattish with those on the S&P 500 (+0.06%) and NASDAQ 100 (+0.12%) taking a bit of a breather after a hectic week.

In the energy markets, oil prices are slightly higher this morning with Brent futures (+1.04%) trading at $75.48/bbl and WTI (+1.05%) at $69.07/bbl amid positive market sentiment as well as strong China demand expectations.

To the day ahead now, and data releases from the US include the University of Michigan’s consumer sentiment index for March, industrial production for February, and the Conference Board’s leading index for February. Over in Europe, we’ll get the final Euro Area CPI reading for February. Lastly, central bank speakers include the ECB’s Simkus.

Tyler Durden Fri, 03/17/2023 - 08:25

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Das: Is A Full-Blown Global Banking Crisis In The Offing?

Das: Is A Full-Blown Global Banking Crisis In The Offing?

Authored by Styajit Das via,

If everything is fine, then why…



Das: Is A Full-Blown Global Banking Crisis In The Offing?

Authored by Styajit Das via,

If everything is fine, then why are US banks borrowing billions at punitive rates at the discount window... a larger amount than in 2008/9?

Financial crashes like revolutions are impossible until they are inevitable. They typically proceed in stages. Since central banks began to increase interest rates in response to rising inflation, financial markets have been under pressure.

In 2022, there was the crypto meltdown (approximately $2 trillion of losses).

The S&P500 index fell about 20 percent. The largest US technology companies, which include Apple, Microsoft, Alphabet and Amazon, lost around $4.6 trillion in market value  The September 2022 UK gilt crisis may have cost $500 billion. 30 percent of emerging market countries and 60 percent of low-income nations face a debt crisis. The problems have now reached the financial system, with US, European and Japanese banks losing around $460 billion in market value in March 2023.

While it is too early to say whether a full-fledged financial crisis is imminent, the trajectory is unpromising.


The affected US regional banks had specific failings. The collapse of Silicon Valley Bank ("SVB") highlighted the interest rate risk of financing holdings of long-term fixed-rate securities with short-term deposits. SVB and First Republic Bank ("FRB") also illustrate the problem of the $250,000 limit on Federal Deposit Insurance Corporation ("FDIC") coverage. Over 90 percent of failed SVB and Signature Bank as well as two-thirds of FRB deposits were uninsured, creating a predisposition to a liquidity run in periods of financial uncertainty.

The crisis is not exclusively American. Credit Suisse has been, to date, the highest-profile European institution affected. The venerable Swiss bank -- which critics dubbed  'Debit Suisse' -- has a troubled history of banking dictators, money laundering, sanctions breaches, tax evasion and fraud, shredding documents sought by regulators and poor risk management evidenced most recently by high-profile losses associated with hedge fund Archegos and fintech firm Greensill. It has been plagued by corporate espionage, CEO turnover and repeated unsuccessful restructurings.

In February 2023, Credit Suisse announced an annual loss of nearly Swiss Franc 7.3 billion ($7.9 billion), its biggest since the financial crisis in 2008. Since the start of 2023, the bank's share price had fallen by about 25 percent. It was down more than 70 percent over the last year and nearly 90 percent over 5 years. Credit Suisse wealth management clients withdrew Swiss Franc 123 billion ($133 billion) of deposits in 2022, mostly in the fourth quarter.

The categoric refusal -- "absolutely not" -- of its key shareholder Saudi National Bank to inject new capital into Credit Suisse precipitated its end. It followed the announcement earlier in March that fund manager Harris Associates, a longest-standing shareholder, had sold its entire stake after losing patience with the Swiss Bank’s strategy and questioning the future of its franchise.

While the circumstances of individual firms exhibit differences, there are uncomfortable commonalities - interest rate risk, uninsured deposits and exposure to loss of funding.


Banks globally increased investment in high-quality securities -- primarily government and agency backed mortgage-backed securities ("MBS"). It was driven by an excess of customer deposits relative to loan demand in an environment of abundant liquidity. Another motivation was the need to boost earnings under low-interest conditions which were squeezing net interest margin because deposit rates were largely constrained at the zero bound. The latter was, in part, driven by central bank regulations which favour customer deposit funding and the risk of loss of these if negative rates are applied.

Higher rates resulted in unrealised losses on these investments exceeding $600 billion as at end 2022 at
Federal Deposit Insurance Corporation-insured US banks. If other interest-sensitive assets are included, then the loss for American banks alone may be around $2,000 billion. Globally, the total unrealised loss might be two to three times that.

Pundits, most with passing practical banking experience, have criticised the lack of hedging. The reality is that eliminating interest rate risk is costly and would reduce earnings. While SVB's portfolio's duration was an outlier, banks routinely invest in 1- to 5-year securities and run some level of the resulting interest rate exposure.

Additional complexities inform some investment portfolios. Japanese investors have large holdings of domestic and foreign long-maturity bonds. The market value of these fixed-rate investments have fallen. While Japanese short-term rates have not risen significantly, rising inflationary pressures may force increases that would reduce the margin between investment returns and interest expense reducing earnings.

It is unclear how much of the currency risk on these holdings of Japanese investors is hedged. A fall in the dollar, the principal denomination of these investments, would result in additional losses. The announcement by the US Federal Reserve ("the Fed") of coordinated action with other major central banks (Canada, England, Japan, Euro-zone and Switzerland) to provide US dollar liquidity suggests ongoing issues in hedging these currency exposures.

Banking is essentially a confidence trick because of the inherent mismatch between short-term deposits and longer-term assets. As the rapid demise of Credit Suisse highlights, strong capital and liquidity ratios count for little when depositors take flight.

Banks now face falling customer deposits as monetary stimulus is withdrawn, the build-up of savings during the pandemic is drawn down and the economy slows. In the US, deposits are projected to decline by up to 6 percent. Financial instability and apprehension about the solvency of individual institutions can, as recent experience corroborates, result in bank runs.


The fact is that events have significantly weakened the global banking system. A 10 percent loss on bank bond holdings would, if realised, decrease bank shareholder capital by around a quarter. This is before potential loan losses, as higher rates affect interest-sensitive sectors of the economy, are incorporated.

One vulnerable sector is property, due to high levels of leverage generally employed.

House prices are falling albeit from artificially high pandemic levels. Many households face financial stress due to high mortgage debt, rising repayments, cost of living increases and lagging real income. Risks in commercial real estate are increasing. The construction sector globally shows sign of slowing down. Capital expenditure is decreasing because of uncertainty about future prospects. Higher material and energy costs are pushing up prices further lowering demand.

Heavily indebted companies, especially in cyclical sectors like non-essential goods and services and many who borrowed heavily to get through the pandemic will find it difficult to repay debt. The last decade saw an increase in leveraged purchases of businesses. The value of outstanding US leveraged loans used in these transactions nearly tripled from $500 billion in 2010 to around $1.4 trillion as of August 2022, comparable to the $1.5 trillion high-yield bond market. There were similar rises in Europe and elsewhere.

Business bankruptcies are increasing in Europe and the UK although they fell in the US in 2022. The effects of higher rates are likely to take time to emerge due to staggered debt maturities and the timing of re-pricing. Default rates are projected to rise globally resulting in bank bad debts, reduced earnings and erosion of capital buffers.


There is a concerted effort by financial officials and their acolytes to reassure the population and mainly themselves of the safety of the financial system. Protestations of a sound banking system and the absence of contagion is an oxymoron. If the authorities are correct then why evoke the ‘systemic risk exemption’ to guarantee all depositors of failed banks? If there is liquidity to meet withdrawals then why the logorrhoea about the sufficiency of funds? If everything is fine, then why have US banks borrowed $153 billion at a punitive 4.75% against collateral at the discount window, a larger amount than in 2008/9? Why the compelling need for authorities to provide over $1 trillion in money or force bank mergers?

John Kenneth Galbraith once remarked that "anyone who says he won't resign four times, will". In a similar vein, the incessant repetition about the absence of any financial crisis suggests exactly the opposite.


The essential structure of the banking is unstable, primarily because of its high leverage where around $10 of equity supports $100 of assets. The desire to encourage competition and diversity, local needs, parochialism and fear of excessive numbers of systemically important and 'too-big-to-fail' institutions also mean that there are too many banks.

There are over 4,000 commercial banks in the US insured by the FDIC with nearly $24 trillion in assets, most of them small or mid-sized. Germany has around 1,900 banks including 1,000 cooperative banks, 400 Sparkassen, and smaller numbers of private banks and Landesbanken. Switzerland has over 240 banks with only four (now three) major institutions and a large number of cantonal, regional and savings banks.

Even if they were adequately staffed and equipped, managers and regulators would find it difficult to monitor and enforce rules. This creates a tendency for 'accidents' and periodic runs to larger banks.

Deposit insurance is one favoured means of ensuring customer safety and assured funding. But that entails a delicate balance between consumer protection and moral hazard - concerns that it might encourage risky behaviour. There is the issue of the extent of protection.

In reality, no deposit insurance system can safeguard a banking system completely, especially under conditions of stress. It would overwhelm the sovereign's balance sheet and credit. Banks and consumers would ultimately have to bear the cost.

Deposit insurance can have cross-border implications. Thought bubbles like extending FDIC deposit coverage to all deposits for even a limited period can transmit problems globally and disrupt currency markets. If the US guarantees all deposits, then depositors might withdraw money from banks in their home countries to take advantage of the scheme setting off an international flight of capital. The movement of funds would aggravate any dollar shortages and complicate hedging of foreign exchange exposures. It may push up the value of the currency inflicting losses on emerging market borrowers and reducing American export competitiveness.

In effect, there are few if any neat, simple answers.


This means the resolution of any banking crisis relies, in practice, on private sector initiatives or public bailouts.

The deposit of $30 billion at FRB by a group of major banks is similar to actions during the 1907 US banking crisis and the 1998 $3.6 billion bailout of hedge fund Long-Term Capital Management. Such transactions, if they are unsuccessful, risk dragging the saviours into a morass of expanding financial commitments as may be the case with FRB.

A related option is the forced sale or shotgun marriage. It is unclear how given systemic issues in banking, the blind lending assistance to the deaf and dumb strengthens the financial system. Given the ignominious record of many bank mergers, it is puzzling why foisting a failing institution onto a healthy rival constitutes sound policy.

HSBC, which is purchasing SVB's UK operations, has a poor record of acquisitions that included Edmond Safra's Republic Bank which caused it much embarrassment and US sub-prime lender Household International just prior to the 2008 crisis. The bank's decision to purchase SVB UK for a nominal £1 ($1.20) was despite a rushed due diligence and admissions that it was unable to fully analyse 30 percent of the target's loan book. It was justified as 'strategic' and the opportunity to win new start-up clients.

On 19 March 2023, Swiss regulators arranged for a reluctant UBS, the country's largest bank, to buy Credit Suisse after it become clear that an emergency Swiss Franc 50 billion ($54 billion) credit line provided by the Swiss National Bank was unlikely to arrest the decline. UBS will pay about Swiss Franc 0.76 a share in its own stock, a total value of around Swiss Franc 3 billion ($3.2 billion). While triple the earlier proposed price, it is nearly 60 percent lower than CS’s last closing price of Swiss Franc1.86.

Investors cheered the purchase as a generational bargain for UBS. This ignores Credit Suisse's unresolved issues including toxic assets and legacy litigation exposures. It was oblivious to well-known difficulties in integrating institutions, particularly different business models, systems, practices, jurisdictions and cultures. The purchase does not solve Credit Suisse's fundamental business and financial problems which are now UBS’s.

It also leaves Switzerland with the problem of concentrated exposure to a single large bank, a shift from its hitherto preferred two-bank model. Analysts seemed to have forgotten that UBS itself had to be supported by the state in 2008 with taxpayer funds after suffering large losses to avoid the bank being acquired by foreign buyers.


The only other option is some degree of state support.

The UBS acquisition of Credit Suisse requires the Swiss National Bank to assume certain risks. It will provide a Swiss Franc 100 billion ($108 billion) liquidity line backed by an enigmatically titled government default guarantee, presumably in addition to the earlier credit support. The Swiss government is also providing a loss guarantee on certain assets of up to Swiss Franc 9 billion ($9.7 billion), which operates after UBS bears the first Swiss Franc 5 billion ($5.4 billion) of losses.

The state can underwrite bank liabilities including all deposits as some countries did after 2008. As US Treasury Secretary Yellen reluctantly admitted to Congress, the extension of FDIC coverage was contingent on US officials and regulators determining systemic risk as happened with SVB and Signature. Another alternative is to recapitalise banks with public money as was done after 2008 or finance the removal of distressed or toxic assets from bank books.

Socialisation of losses is politically and financially expensive.

Despite protestations to the contrary, the dismal truth is that in a major financial crisis, lenders to and owners of systemic large banks will be bailed out to some extent.

European supervisors have been critical of the US decision to break with its own standard of guaranteeing only the first $250,000 of deposits by invoking a systemic risk exception while excluding SVB as too small to be required to comply with the higher standards applicable to larger banks. There now exist voluminous manuals on handling bank collapses such as imposing losses on owners, bondholders and other unsecured creditors, including depositors with funds exceeding guarantee limit, as well as resolution plans designed to minimise the fallout from failures. Prepared by expensive consultants, they serve the essential function of satisfying regulatory checklists. Theoretically sound reforms are not consistently followed in practice. Under fire in trenches, regulators concentrate on more practical priorities.

The debate about bank regulation misses a central point. Since the 1980s, the economic system has become addicted to borrowing-funded consumption and investment. Bank credit is central to this process. Some recommendations propose a drastic reduction in bank leverage from the current 10-to-1 to a mere 3-to1. The resulting contraction would have serious implications for economic activity and asset values.

In Annie Hall, Woody Allen cannot have his brother, who thinks he is a chicken, treated by a psychiatrist because the family needs the eggs. Banking regulation flounders on the same logic.

As in all crises, commentators have reached for the 150-year-old dictum of Walter Bagehot in Lombard Street that a central bank's job is "to lend in a panic on every kind of current security, or every sort on which money is ordinarily and usually lent."

Central bankers are certainly lending, although advancing funds based on the face value of securities with much lower market values would not seem to be what the former editor of The Economist had in mind. It also ignores the final part of the statement that such actions "may not save the bank; but if it do not, nothing will save it."

Banks everywhere remain exposed. US regional banks, especially those with a high proportion of uninsured deposits, remain under pressure.

European banks, in Germany, Italy and smaller Euro-zone economies, may be susceptible because of poor profitability, lack of essential scale, questionable loan quality and the residual scar tissue from the 2011 debt crisis.

Emerging market banks' loan books face the test of an economic slowdown. There are specific sectoral concerns such as the exposure of Chinese banks to the property sector which has necessitated significant ($460 billion) state support.

Contagion may spread across a hyper-connected financial system from country to country and from smaller to larger more systematically important banks. Declining share prices and credit ratings downgrades combined with a slowdown in inter-bank transactions, as credit risk managers become increasingly cautious, will transmit stress across global markets.

For the moment, whether the third banking crisis in two decades remains contained is a matter of faith and belief. Financial markets will test policymakers' resolve in the coming days and weeks.

Tyler Durden Sat, 03/25/2023 - 10:30

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Southwest Airlines Tries to End a Passenger Boarding Pain Point

The company has a novel way to end a practice that passengers hate.



The company has a novel way to end a practice that passengers hate.

Southwest Airlines boards its planes in a way very different from that of any of its major rivals.

As fans and detractors of the brand know, the airline does not offer seat assignments. Instead, passengers board by group and number. When you check into your flight, Southwest assigns you to the A, B, or C boarding groups and gives you a number 1-60. The A group boards first in numerical order.

DON'T MISS: Delta Move Is Bad News For Southwest, United Airlines Passengers

In theory, people board in the assigned order and can claim any seat that's available. In practice, the airline's boarding process leaves a lot of gray area that some people exploit. Others simply don't know exactly what the rules are.

If, for example, you are traveling with a friend who has a much later boarding number, is it okay to save a middle seat for that person?

Generally, that's okay because middle seats are less desirable, but technically it's not allowed. In general practice, if you move into the second half of the plane, no passenger will fight for a specific middle seat, but toward the front some may claim a middle seat.

There's less grey area, however, when it comes to trying to keep people from sitting in unoccupied seats. That's a huge problem for the airline, one that Southwest has tried to address in a humorous way.

A Southwest Airlines plane is in the air. 

Image source: Shutterstock

Southwest Airlines Has a Boarding Problem

When Southwest boards its flights it generally communicates to passengers about how full it expects the plane to be. In very rare cases, the airline will tell passengers when the crowd is small and they can expect that nobody will have to sit in a middle seat.

In most cases, however, at least since air travel has recovered after the covid pandemic, the airline usually announces that the flight is full or nearly full as passengers board. That's a de facto (and sometimes explicit) call not to attempt to discourage people from taking open seats in your row.

Unfortunately, many passengers know that sometimes when the airline says a flight is full, that's not entirely true. There might be a few no shows or a few seats that end up being open for one reason or another.

That leads to passengers -- at least a few of them on nearly every flight -- going to great lengths to try to end up next to an empty seat. Southwest has tried lots of different ways to discourage this behavior and has now resorted to humor in an effort to stop the seat hogs.

Southwest Uses Humor to Address a Pain Point

The airline recently released a video that addressed what it called "discouraged but crafty strategies to get a row to yourself" on Southwest. The video shows a man demonstrating all the different ways people try to dissuade other passengers from taking the open seats in their row.

These include, but are not limited to:

  • Laying out across the whole row.   
  • Holding your arm up to sort of block the seats.
  • Being too encouraging about someone taking the seat.
  • Actually saying no when someone asks if they can have an open seat. 

The airline also detailed a scenario it called "the fake breakup," where the person in the seat holds a loud phone conversation where he pretends he's being broken up with.

That one seems a bit of a reach, especially when Southwest left the most common seat-saving tactic out of its video -- simply putting some of your stuff in the open seat to make it appear unavailable.

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Why We Opened The Belgrade Bitcoin Hub

With a rich history and recent evolution, Belgrade is now home to the latest Bitcoin working and presentation space.




With a rich history and recent evolution, Belgrade is now home to the latest Bitcoin working and presentation space.

This is an opinion editorial by Plumski, a native of Serbia and founder of the Belgrade Bitcoin Hub.

“What we now want is closer contact and better understanding between individuals and communities all over the earth, and the elimination of egoism and pride which is always prone to plunge the world into primeval barbarism and strife…”

–Serbian-American inventor Nikola Tesla.

As Bitcoin adoption grows at an unprecedented rate for a new technology, Bitcoiners are setting up physical locations around the world where enthusiasts can work and play in group atmospheres.

For those of us taking part in this Bitcoin "Renaissance" period, it has been a great joy to watch the Bitcoin Beach success story in El Salvador that likely resulted in the country-wide adoption of bitcoin as legal tender. Since such projects are numerous in Africa, Central and South America, Bitcoiners living in Eastern Europe have watched these developments with intrigue. And added to that is the fact that Eastern Europe is economically underdeveloped compared to its Western European counterpart.

Inspired by what we saw in other parts of the world, a small group of Bitcoiners centered in the Serbian capital city of Belgrade recently opened a Bitcoin hub where we want to welcome visitors from around the world.

A New Chapter For A Historic City


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Belgrade is a city that lies at the confluence of two great European rivers, the Danube and Sava, the apex of which is marked by the great Kalemegdan Fortress. This defensive fortress has withstood the test of time for over 15 centuries, bearing witness to battles too numerous to count. The history of Belgrade and the Serbian people as a whole has been a turbulent one.

Having the (mis)fortune of being located at the center of the geopolitically-important Balkan Peninsula, often on the border of two rivaling Eurasian empires, its people have been fighting for their independence from foreign influence throughout their history. Although it’s hard to estimate, history suggests that Belgrade has been destroyed and rebuilt over 40 times throughout its 17-century existence. Despite this, or perhaps because of it, Belgrade has always been the economic and artistic center of the region, as well as a home to people of all races, faiths and denominations.

Today, Belgrade is once again undergoing an important historical transition period. During the 1990s, civil wars took place in Croatia and Bosnia, republics of former Yugoslavia, culminating in the NATO bombing of Serbia and its capital city in 1999 and about 15 years of economic isolation from the western world.

Although the transformation is not fully complete, Belgrade is re-emerging as a vibrant cultural epicenter of the region. Much like the mosaic of architectural styles visible in the city's buildings, ranging from Communist-style, soulless heaps of gray concrete intermingled with wonderful old Secessionist buildings adorned with ornamental facades, its streetfronts are a collage of mom-and-pop-owned, modest businesses clashing with modern boutiques and glass-clad office buildings. Gone are the days when food options in the city's restaurants were limited solely to Balkan traditional cuisine. Now, poke, sushi, Chinese and Indian food, burger joints and American-style diners are all on the menu for the city's residents.

Contributing to the metamorphosis of the city's cultural fabric is also a noticeable shift in the residents who make up its population. Perhaps due to the relatively low cost of living compared to other world capitals, or Serbia's generally lax pandemic restrictions, or the political uncertainty that seems to have gripped the western world as of late, I have seen that a once heavily-emigrating city has been welcoming back a large segment of its old population and a sizeable inpouring of digital nomads that now call this place home.

Bitcoin Resilience, Despite Obstacles

In Serbian, the term "inat," a historically-defining characteristic of its people, can be loosely translated as "resilience." This mindset is ingrained in its population which, time and time again, rebuilds its homes on the heels of destructive periods to their former glory, to the dismay of invading armies, occupiers and detractors, because: inat.

As a result of years of unfulfilled promises from regional politicians, people of the Balkans are hard to convince about the long-term benefits that can be realized by adopting Bitcoin in one's life. A low time preference way of life to most people in this region is associated with disappointment and the lowered standards of living that have happened many times before.

Promises of quick riches (especially ones that suggest there is no associated risk whatsoever) is much more preferable for many and, thus, the power of the shitcoin narrative has sadly thrived in this region as "cryptocurrency" and "blockchain" marketing schemes gripped the world at large. To those of us who grew up in this part of the world, it is a dark comedy that, for instance, the Celsius bankruptcy affected our country as well. Like an exaggerated piece of irony from an Emir Kusturica movie, when the dust around this company's disastrous financial collapse finally settled, legal documents revealed that several entities associated with the Serbian government were listed as creditors to this well-known Ponzi scheme.

In general, Bitcoin-only companies and projects are hard to find here, but a growing community of Balkan Bitcoiners are imagining a different world of financial freedom to their compatriots.

And, much like Belgrade many times before, my personal life is undergoing a restructuring period. On my travels through the Bitcoin rabbit hole, I have met many people who are redesigning their lives around this paradigm-shifting technological discovery. With my recent move back from Canada to the city where I grew up, as I look around, it is easy to draw many parallels between the Bitcoin network architecture and the somewhat chaotic organization of Belgrade that just somehow seems to work — tick tock, next block.

A live DvadesetJedan podcast stream from Rab, Croatia.

Introducing DvadesetJedan

A group of us Bitcoiners from the countries of former Yugoslavia began to organize regular meetups about a year ago. Our group, called DvadesetJedan is an offshoot of the German Einundzwanzig initiative that was started to bring plebs together in meatspace so that enthusiasts can socialize, share ideas and formulate business ventures together in an informal atmosphere.

The idea behind Einundzwanzig is that geographically-distributed, independent Bitcoin communities can form across the world and eventually collaborate on their ongoing projects and offer traveling Bitcoiners a home, wherever they happen to be. In the Balkans, DvadesetJedan records a weekly podcast in the Serbian/Croatian language to cover Bitcoin news, philosophy and the technical architecture of the network. We are very proud to be the first Bitcoin-only podcast in the region and it is a great way for people that are too far from the city's urban centers, where our meetups take place, to receive high-signal Bitcoin content on a regular basis. This podcast is also complemented by our active Telegram channel and while our core group is made up of vehement shitcoin minimalists, a fair-sized part of the group is made up of noobs. We take special joy in guiding them through their journey toward understanding Bitcoin.

Since four of the six former Yugoslav republics that are now independent countries speak the same language, our initiative is multinational in nature. We collaborate with members from Slovenia, Macedonia, Croatia, Bosnia and Montenegro and our group has been steadily growing over the past year. We have a mixture of Bitcoin builders, content creators, developers and Bitcoin enthusiasts in the group who all come together on a regular basis for bar hopping, barbecues and road trips to Bitcoin events in the region.

While trendy breweries and coffee shops for our meetups are aplenty in Belgrade, a Bitcoin-dedicated space did not exist here nor in the wider Balkan peninsula. A small group of us decided to undertake the mission of finding and equipping a space where more serious discussions and presentations can take place.

Since Bitcoin professionals here are somewhat isolated compared to more-established regions such as Germany and the U.S., we also wanted the space to serve as a co-working environment for locals to bounce ideas off of other experts in the field. As we plan on partnering with local developers to build Bitcoin-focused businesses, this office space would also serve as the physical location for new startups to work with their teams.

Meetup in Belgrade: R0ckstarDev and Johns Beharry displaying Bitko Yinowski’s famous Bitcoin jam made from Serbian apricots.

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The hunt was on and we scoured Belgrade in search of an ideal location. We focused our search to the center of the city so that future visitors can not only work in a comfortable space but can also easily access the museums, galleries, music venues, bars and restaurants that make up Belgrade's exciting social scene. We eventually found a duplex on the top floor of an old, mixed-use building next to the University of Belgrade’s philosophy faculty and it is perhaps fitting that the fort of Kalemegdan is within a two-minute walk from our new Belgrade Bitcoin Hub.

Welcome To The Belgrade Bitcoin Hub

Elevator control board to the top floor of the building where the hub is located. Source: Author.

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The hub features a large, communal, co-working/presentation room where most of the action will be taking place, with two additional rooms that we will outfit into a recording studio and a more private office space.

At our disposal for visitors we have a variety of hardware wallets, a point-of-sale unit powered by BTCPay Server, a Bitcoin node and an Antminer S9 to experiment with the newest software being developed by the tenants of the space. For educational purposes, or to get extra inspiration, the hub has a small collection of Bitcoin literature for visitors to read.

During the early days of activity in the hub, it has been populated by drop-in visitors that prefer working in group settings. As we grow, we will develop the hub to be a venue for cultural events, art exhibits/auctions, hackathons, as well as a small-scale presentation center for Bitcoiners. While advanced users will be working at the hub, novices will benefit from presentations and hands-on demonstrations that will take place in the evenings and weekends. Inspired by many ventures around the world with similar goals in mind, we are especially proud that we made this hub a reality using our own funds to finance these initial steps.

In one of the first public presentations at the hub, Pavlenex described the history of the BTCPay Server project along with a live demo to an audience. Source: Author.

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We want this space to be a permanent Bitcoin home in Belgrade and we hope that organizing such events will enable the space to finance itself for many years to come. While locals will be able to purchase annual memberships, we also have a structure in place so that Bitcoiners who do not live in Belgrade can come and work from the hub during their visits to Serbia. We are especially excited to welcome foreigners to the Belgrade Bitcoin Hub to build and help us build, however, the space will be limited.

Indeed, matching Bitcoiners from around the world with the immense talent that exists in Serbia is one of our top priorities. After all, everything our small group of believers has done to date has culminated into the Belgrade Hub genesis block.

This is a guest post by Plumski. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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