Dip in yields hit European banking shares as SVB collapse fallout deepens

By Scott Kanowsky 

Investing.com -- European banking stocks dropped on Monday, reflecting a dip in government bond yields across the continent that stemmed from expectations that the downfall of Silicon Valley Bank would lead to a slowdown in a recent slew of central bank interest rate hikes.

In morning trading, shares in some of the region's biggest lenders, such as Banco Santander (BME:SAN), Commerzbank (ETR:CBKG), and UniCredit (BIT:CRDI), were near the bottom of the pan-European Stoxx 600. Credit Suisse stock, in particular, slipped by almost 10% to touch a new record low.

Europe's Stoxx 600 Banks also fell by about 1%, adding on to losses last week sparked by the turmoil surrounding SVB and putting it on pace for its largest two-day decline since the outbreak of the war in Ukraine in 2022.

With $212 billion in assets, SVB was the second biggest lender to fail in U.S. history. In the wake of the collapse, analysts at Goldman Sachs (NYSE:GS) argued that it no longer expects the Federal Reserve to increase borrowing costs when policymakers meet next week.

The yield on benchmark German 10-year government bonds decreased to about 2.2%, down from over 2.7% before the start of the slide in SVB. Corresponding debt yields in France and Italy were also lower.

Elsewhere on Monday, HSBC agreed with the Bank of England to buy the U.K. operations of SVB. In a joint statement with the Treasury, the Bank said it could confirm that "all depositors' money with SVBUK is safe and secure as a result of this transaction" and that "all services will continue to operate as normal and customers should not notice any changes." London-listed shares in HSBC (LON:HSBA) dipped slightly into the red in the wake of the announcement.

Over the weekend, the U.S. Treasury, Federal Reserve, and Federal Deposit Insurance Corporation put together a bailout package as well that essentially protected all of SVB's depositors, including those with assets above the federally guaranteed $250,000 limit.