The intervention of the US authorities at the California bank Silicon Valley Bank (SVB), after the collapse on Wall Street (more than 60% loss on Thursday) it shot up the so-called fear index.
The VIX index, which attempts to quantify stock market volatility, rose as high as 27% today.
The downturn of the SVB, though only present in the states of California and Massachusetts, has sparked fear among investors, who see it as the harbinger of a new era, as this is the largest bank failure since the 2008 economic crisis and one of the largest in US history.
Others, however, see something in SVB’s end that stems from its peculiarity, as it bet on investments in long-dated government bonds and venture capital firms during the novel coronavirus pandemic.
What is certain is that fate befell other banks such as Signature Bank, First Republic Bank, Western Alliance or PacWest, as well as major banking conglomerates.both in the US and abroad.
The VIX, which has not seen such high values since October, is also known as the “fear index” because it measures investor expectations of volatility and uncertainty and serves as a tool for understanding market sentiment.
When the VIX is low, it suggests that investors are relatively optimistic and confident about future market conditions.
Silicon Valley Bank, headquartered in Santa Clara, California, specialized in the technology sector and primarily did business with emerging companies (“startups”).
With the difficulties facing the industry, including rising interest rates and volatility in technology, customers have been withdrawing large amounts from their accounts in recent months.
In order to have sufficient liquidity, Silicon Valley Bank announced on Wednesday evening that it wanted to raise capital quickly. In the ensuing turmoil, the bank lost 60% on the New York Stock Exchange on Thursday and shares were suspended ahead of today’s session.
Source: DN
