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Chart Of The Day: Taper Fears Lead To Biggest Monthly Loss In Bank Securities Portfolios Since Lehman

Tyler Durden's picture


Wondering how the blow out in interest rates is impacting commercial banks, which just happen to have substantial duration exposure in the form of various Treasury and MBS securities, not to mention loans, structured products and of course, trillions in IR swap, derivatives and futures? Wonder no more: the Fed's weekly H.8 statement, and specifically the "Net unrealized gains (losses) on available-for-sale securities" of commercial banks in the US gives a glimpse into the pounding that banks are currently experiencing. In short: a bloodbath.

After crashing from $15 billion to just $6 billion, the reported balance of net unrealized gains is barely positive for just the first time since April 2011. And to think this number had topped out at over $43 billion in December 2012. But the worst is that monthly drop in "gains" of $24 billion is the biggest by a wide margin since the Lehman collapse.

Note the crash in the long-term chart:

And zoomed in:

The skeptics will say: $6 billion? Big deal. The Fed did almost that much in its POMO last Wednesday. The issue, however, is that the AFS line, which runs through the Accumulated Other Comprehensive Income line as the last thing banks want is for MTM to crush their reported bottom line is merely a proxy for how rising rates impact on a snapshot basis the consolidated bank balance sheet of US banks, which at last check had $7.3 trillion in loans and leases (still below pre-Lehman levels) not to mention countless other undisclosed instruments that represent their "London Whale" equivalent prop positions, funded with customer deposits.

In other words, the shorthand is to look at the massacre that is going on in the AFS line and extrapolate it to all other levered commercial bank (and hedge fund) rate exposure. Expect math PhD-programmed GETCO algos that determine the marginal momentum of the S&P to figure this out some time over the next 2-3 weeks once banks begin reporting results that are not quite in line with expectations.


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Mon, 07/08/2013 - 09:18 | 3730420 disabledvet
disabledvet's picture

you know how bankers love surprises.

Mon, 07/08/2013 - 09:39 | 3730466 BaBaBouy
BaBaBouy's picture

BEN Shalom Taper ???
More like TAPE WORM...

Mon, 07/08/2013 - 09:52 | 3730505 sunaJ
sunaJ's picture

Fucking junkies. By all means, let's continue to fund the immorality.

Mon, 07/08/2013 - 10:04 | 3730529 Divided States ...
Divided States of America's picture

The only bloodbath I see is in my put options are in a sea of red...this has gone beyond any realm of logic. Oh well, this is my retirement account money which I dont think I will see that anyways when I retire at 90.

Mon, 07/08/2013 - 10:13 | 3730557 Dr. Engali
Dr. Engali's picture

You've been here long enough to know that the only strategy you need is to BTFD.

Mon, 07/08/2013 - 11:29 | 3730828 Snoopy the Economist
Snoopy the Economist's picture

don't give up yet - I'm still expecting another 10% drop from here.

Mon, 07/08/2013 - 12:52 | 3731094 sgorem
sgorem's picture

"In short: a bloodbath." When I see these banksters jumping from windows on wall street and around the world, and spilling their own toxic blood on the pavement below, then, and only then, can we can call it a BLOODBATH.

Mon, 07/08/2013 - 13:19 | 3730917 aint no fortuna...
aint no fortunate son's picture

the bottom line impact on earnings won't be an issue - that's why they invented loan loss reserve adjustments

Mon, 07/08/2013 - 09:22 | 3730422 Headbanger
Headbanger's picture

Whoa!  And the sequester job cuts in defense start today

Mon, 07/08/2013 - 10:19 | 3730584 HardAssets
HardAssets's picture

Why's a guy on a ship wearing blue camo BDUs ?  Is this what they outfit the Navy with today ?  Job cut # 1 outta be the guy who came up with that, if that's what theyre freakin' wearing.

Mon, 07/08/2013 - 09:20 | 3730427 Dr. Engali
Dr. Engali's picture

Unwealth effect bitchez!

Mon, 07/08/2013 - 09:44 | 3730481 mess nonster
mess nonster's picture

"net unrealized gains" I fucking love it. Some other Newspeakian terms that can be used:

deflation: "inverse monetary valuation protocol"

ponzi scheme: "expectative crowd-sourcing financialization strategy"

inflation: "institutionally mandated securitized exchange-medium growth"

taxpayer bailout: "group-sourced financial equalization package"

Notice the similarity of the terms used for "bailout" and "ponzi scheme".

Mon, 07/08/2013 - 09:50 | 3730499 Dr. Engali
Dr. Engali's picture


Mon, 07/08/2013 - 10:11 | 3730547 illyia
illyia's picture

++ 401K

Mon, 07/08/2013 - 10:40 | 3730646 ParkAveFlasher
ParkAveFlasher's picture


Mon, 07/08/2013 - 11:30 | 3730833 MarsInScorpio
MarsInScorpio's picture



Spealing of that number, the latest End Times revelation going around:


Barack Hussein Obama = 18 letters = 6+6+6


Mon, 07/08/2013 - 12:30 | 3730955 Dr. Engali
Dr. Engali's picture

They said the same thing about: Ronald Wilson Reagan. Considering world events, this time they may be right.

Mon, 07/08/2013 - 10:31 | 3730625 CPL
CPL's picture

net unrealized gains:

I imagined that I had a 12 inch dick, a bazillion dollars in the bank, had a super hawt girlfriend, a part time porno career and a flying boat plane. There fore I actually have all that stuff because I imagined it.  

These are all net unrealized gains.  Declaring the fictional as non-fiction.

Mon, 07/08/2013 - 10:41 | 3730650 ParkAveFlasher
ParkAveFlasher's picture

I believe I can fly!

Mon, 07/08/2013 - 11:36 | 3730847 Snoopy the Economist
Snoopy the Economist's picture

Jump and prove it...

Mon, 07/08/2013 - 09:22 | 3730429 involuntarilybirthed
involuntarilybirthed's picture

Will this affect their collateral quality?

Mon, 07/08/2013 - 09:40 | 3730472 NoDebt
NoDebt's picture

Winner winner, chicken dinner!  In a world of infinite rehypothecation, any shock to underlying collateral is like shaking the table under the house of cards.  100 bps move in Treasuries in a month (and the wrong direction if you own them) is giving the table a pretty good shake.

Mon, 07/08/2013 - 12:00 | 3730918 Panafrican Funk...
Panafrican Funktron Robot's picture

Really, for the Fed to have any kind of meaningful control over interest rates, they would need QE to be about 10x it's current size.  They are presently a bug on the windshield vs. the IR swaps market.

Mon, 07/08/2013 - 10:01 | 3730523 FullFaithAndCretin
FullFaithAndCretin's picture

Involuntary, you are thinking about the gold price aren't you?

Mon, 07/08/2013 - 10:32 | 3730626 CPL
CPL's picture

What collateral?

Would you take anything they offered?  LOL!

Mon, 07/08/2013 - 09:22 | 3730430 slaughterer
slaughterer's picture

Banks should be good until Friday when the tide goes out. 

Mon, 07/08/2013 - 09:23 | 3730431 JFKFC
JFKFC's picture

Long FAZ
3x inverse financial sector ETF.
Cramer's boo-hoo is my boo-yah bitchez.

Mon, 07/08/2013 - 09:27 | 3730446 fonzannoon
fonzannoon's picture

good luck man. I learned the hard way not to short anything that can be bailed out and mark to unicorn.

I do think the banks may become the de facto way of playing the mining industry, as it seems they are intent on owning all of them. When the price of gold explodes and those bankrupt mining companies become the most valuable companies on the planet...of course the banks will be the way to play it.


Mon, 07/08/2013 - 09:31 | 3730456 eclectic syncretist
eclectic syncretist's picture

Better to short FAS and pocket the decay associated with levered ETF's.

Mon, 07/08/2013 - 09:49 | 3730497 gjp
gjp's picture

Agreed, but somehow it doesn't work out that way.  Seems like everything is engineered such that no bet against the status quo will ever be rewarded.

Mon, 07/08/2013 - 10:21 | 3730600 Meat Hammer
Meat Hammer's picture

To make money like a sociopath one needs to think like a sociopath, and since I'm not nor do I ever plan to be a sociopath, I'll just go on being a broke dick.

Mon, 07/08/2013 - 12:03 | 3730928 Panafrican Funk...
Panafrican Funktron Robot's picture

SPY puts + VXX short = trade that works pretty well.  VXX is the mother of all piles of shit that is heavily traded/liquid.

Mon, 07/08/2013 - 09:39 | 3730468 JFKFC
JFKFC's picture

I bought a grip of the $35 January 2015 calls when Goldman upped their S&P EOY to 1750. Made a killing flipping those in June.
Took my principle off the table & now holding the same position with just profits. No risk, now just waiting for rewards.

Mon, 07/08/2013 - 09:40 | 3730469 Al Huxley
Al Huxley's picture

Same experience.  Better to go 3x long the banks and 3x short the miners.  Then you're following Ben's playbook, and since he and his buddies write the rules you're almost sure to be on the right side of the trade.

Mon, 07/08/2013 - 09:41 | 3730476 Pareto
Pareto's picture

+1 "Mark to Unicorn."  he he.  Aint that the truth.

Mon, 07/08/2013 - 10:34 | 3730635 CPL
CPL's picture

No.  Nien.  Nyet.  NON!.  Nee.


Just don't.  You think you've found a pot of gold, you haven't.  Don't touch it.  Don't touch any of them, they are toxic and harmful to a portfolio.

Mon, 07/08/2013 - 09:25 | 3730438 fonzannoon
fonzannoon's picture

These banks are loaded with deposits right? I am pretty sure no one in the bank has seen their deposit rates go up. So the banks are now taking in the spread, so all I see is us getting bombarded with how great their net interest margin is due to rising rates.

Mon, 07/08/2013 - 09:52 | 3730508 gjp
gjp's picture

They'll spin it one way or another that's for sure.  Everything is peachy in fantasy land until something real goes wrong.  And it still looks like they're going to hold it together for the time being.  PMs firmly under control, I guess the only present wild card is oil.  Bonds, I don't know, I still think they can crank up the monetization if need be, and not even tell anyone they're doing so.

The only thing for sure these days is no matter what is going on in the world, in the economy, with other asset classes, stocks are up.  AMZN new high today!

Mon, 07/08/2013 - 12:10 | 3730948 Panafrican Funk...
Panafrican Funktron Robot's picture

Oil and USD denominated bonds are super duper linked to the actual problem, which is the rapid erosion and approaching end of USD hedgemony.  That is the one and only thing that matters.  There are interested parties in maintaining this hedgemony, and they are fighting like cornered animals, but they are very clearly losing.  Those with "something to lose" aren't fans of waiting around for the shoe to drop, they didn't get to where they are by way of irrational loyalty. 

Mon, 07/08/2013 - 09:30 | 3730454 Duke Dog
Duke Dog's picture

It will be interesting to see how they "manage" the trillions in losses from the IR swaps as rates continue to rise. What you want to bet that MTM on govt securities, even if held as "available for sale" is "temporarily" suspended ..... and the beat goes on, LMAO.................

Mon, 07/08/2013 - 09:41 | 3730474 Al Huxley
Al Huxley's picture

But those are all off balance sheet and marked-to-model so they don't count.

Mon, 07/08/2013 - 12:14 | 3730957 Panafrican Funk...
Panafrican Funktron Robot's picture

Lots of fun things happened in the aftermath of August 2011.  Now lets all remember how much money the FDIC has available.

Bail-in's, bitches.

Mon, 07/08/2013 - 09:33 | 3730458 q99x2
q99x2's picture

Nobody needs banks anyhow. Get rid of them.

Mon, 07/08/2013 - 09:35 | 3730464 Dr. Engali
Dr. Engali's picture

I thought we would have tanks in the street without them.

Mon, 07/08/2013 - 09:36 | 3730465 NoDebt
NoDebt's picture

Stop it.  I'm getting all misty.

Mon, 07/08/2013 - 10:46 | 3730675 ParkAveFlasher
ParkAveFlasher's picture

You're right, q99x2 ... can I call you "q"? 

Objectively, what is a bank but a brick-and-mortar depository of one's extra paper money?  Gold is not money, by tptb's own definitions - it's a commodity, like orange juice, or pork bellies used to make bacon, for your BLT - so why do you need to store it at a bank, why do they want to hold it?

Why do I need a bank to clear my paychecks?

Mon, 07/08/2013 - 09:38 | 3730467 SheepDog-One
SheepDog-One's picture

Who cares? S&P +20 on open YAYYYYYY!!!

Mon, 07/08/2013 - 09:55 | 3730512 thismarketisrigged
thismarketisrigged's picture

dont worry, somehow all the banks will beat expectations on top and bottom line, and they will give good forward guidance how everything is doing perfectly fine.


this green on my screen is nauseating

Mon, 07/08/2013 - 10:27 | 3730609 Meat Hammer
Meat Hammer's picture

I often wonder what it must've been like on that day when the banksters could confirm with absolute certainty that they had finally reached the point where they could not only completely rig the market, but they didn't even have to hide it anymore.  

Mon, 07/08/2013 - 10:15 | 3730563 q99x2
q99x2's picture

FED in process of fixering it now. S&P +11. They've returned to transfering the wealth of nations from te people to the banks and are doubling down. It is not their fault. They are like pedophiles and aren't able to stop until they are locked up.

Mon, 07/08/2013 - 10:16 | 3730567 Conax
Conax's picture

Corporate fascist market controls running on autopilot with the moon dialed in.  Several unicorns have been released, truckloads of skittles are on the way.  The Dow and S&P should achieve escape velocity this week, and never fall back to earth.


Mon, 07/08/2013 - 10:21 | 3730598 Judge Crater
Judge Crater's picture

Guess the Big Banks will have to raise their bounced check charges to $100. 

Mon, 07/08/2013 - 10:39 | 3730644 SheepDog-One
SheepDog-One's picture

Yea really....the ONLY question here is 'In what way will the precious banks losses be bailed out again?'


Mon, 07/08/2013 - 10:48 | 3730686 Mi Naem
Mi Naem's picture

The bankers will reprise and reframe an old Sex Pistols melange: 

"We have cum for your children's college savings, and your 401ks, and your IRAs.  Got any PMs? - we'll have that, too." 

Haircut?  More like head lop. 

Mon, 07/08/2013 - 10:51 | 3730700 bustdrs
bustdrs's picture

A serious plus +100 for The Tyler's continuing the good fight against this rigged, widow making, fed driven shitstorm.
I'm pleased to announce that shitstorm has actually found its place in the German dictionary, at last. They recognized there was a gap in the language.

Mon, 07/08/2013 - 10:51 | 3730701 bustdrs
bustdrs's picture

A serious plus +100 for The Tyler's continuing the good fight against this rigged, widow making, fed driven shitstorm.
I'm pleased to announce that shitstorm has actually found its place in the German dictionary, at last. They recognized there was a gap in the language.

Mon, 07/08/2013 - 10:54 | 3730713 FreeNewEnergy
FreeNewEnergy's picture

Permanent backwardation of gold. World econometrics are on a flight path and speed similar to the one taken by the rookie pilot who crashed in SF.

Crash and burn, with fatalities and multiple spinal injuries is all set for touch down for the global Ponzi. Paging Ben Shalom's tapering dick in 3...2...1...

Mon, 07/08/2013 - 11:14 | 3730789 Lmo Mutton
Lmo Mutton's picture

Not a good analogy sir, too many people lived through that SFO ordeal.


Maybe a Challenger or Discovery event perhaps?

Mon, 07/08/2013 - 11:47 | 3730873 Cthonic
Cthonic's picture

Fairy dust profits and an excess reserve of unicorn shit, need two rivers to hose out the New Yuk Fed.

Mon, 07/08/2013 - 11:48 | 3730879 dudeman
dudeman's picture

It's clear that the Fed doesn't understand the relationship between QE, interest rates, and bond prices. I'm not of the belief that QE necessarily causes interest rates to fall and I don't believe the reason interest rates were so low is because of QE. If you have persistent deflationary conditions where you have massive levels of debt, no private sector credit demand, and falling asset values, which asset classes become good investments? Is it equities? Real estate? Alternate currencies like gold, silver, platinum? Real/productive assets? Or cash and cash equivalents(like government bonds)? The best choice in that situation is long-dated government bonds. Flattening yield curves across the zero lower bound over decades is actually the result of an extremely tight monetary policy where the private sector is not creating money(no credit creation from no private sector credit demand) and no government created money. This is exactly what happened to Japan over the past 20 years.

Let me explain the phenomenon a little bit further in a slightly different way. There is a short run liquidity effect from printing money to buy bonds that pushes bond prices up(more buyers than sellers). However, the information is then dissipated through the market. There is a short run effect that pushes bond prices up, but a longer term effect(higher inflation expectations and future economic risks) that actually pushes bond prices down and yields up.

I think the recent rise in bond yields has to do with banks and hedge funds borrowing short, buying the 10 year(or 30 year), and collecting the spread. Now, I think you're starting to see margin calls due to the leverage. I do think Treasury Yields are headed lower, especially if China goes into a full scale debt deflation while the Yen collapses. I'm really considering buying TLT at this point. I think deflationary pressures hit in the long run and Treasuries end up surging.

Mon, 07/08/2013 - 13:09 | 3731139 evernewecon
evernewecon's picture




TBTF-monopolized monetary policy,

serving a TBTF bubble, only

encourages the continued building and propping up

of known bubbles in the making and

bubbles already established but desired

for the gains from adversity they offer.


But TBTF has needed those who sold the

bubble to hand it over before they could

play the adversity.


Privatization comes from market

controllers saying something

ran out of money so we'll buy it.

It's an LBO of an enterprise.

One can encourage the opportunity's

arising in business, or, in government,

through corrupted government policy.


Does Mr. Bernanke see it that way?

Does he see it?

If he sees it, does he feel there's

no genuine alternative?

Does he feel he can't single-handedly

advocate an alternative?

A resolution trust type plan still could've

included the state buying the banks'

assets acquired through bad decision making,

preserved the bank equity holders' stakes

(is distinct from the depositors) but avoided

the years of Liquidity Trap.


That would have still ripped off all who sold

the bubble, but not have raided savings' income

from everyone else plus leaving most economic

consideration dominated simply by the fact that

when interest rates rise it requires less

principal for equivalent return (not much else

matter when the economy's benchmarked to 0, though

that may now finally be in the rear view mirror.)


Insofar as the TBTF group sold at the top

as well as wanted to play the adversity,

they simply couldn’t share the fluff with the

millions of Americans who also sold at the

top and whose proceeds were left with

the real negative rates benchmark, just as

were all savers but especially their retired

parents living on retirement nest eggs, the

offerings of those who conducted the above.

Talk about controlling the vulnerable.


It's really only now that so much as the

Beveridge Curve and IS/LM start to matter

beyond that simple case.


John R. Hicks on:

The Liquidity Preference

Reflected Only Makes Sense In The

Presence Of Uncertainty.


The Liquidity Trap defined that uncertainty,

except for there being one known thing,

not the fault of what's happening with the

yuan, or Medicare, or Social Security, but

simply what happens when rates can't go

below unsustainable real negative rates.

Have a nice day.

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