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.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
disabledvet's picture

you know how bankers love surprises.

BaBaBouy's picture

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

sunaJ's picture

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

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.

Dr. Engali's picture

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

Snoopy the Economist's picture

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

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.

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

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.

Dr. Engali's picture

Unwealth effect bitchez!

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".

MarsInScorpio's picture



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


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


Dr. Engali's picture

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

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.

involuntarilybirthed's picture

Will this affect their collateral quality?

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.

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.

FullFaithAndCretin's picture

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

CPL's picture

What collateral?

Would you take anything they offered?  LOL!

slaughterer's picture

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

JFKFC's picture

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

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.


eclectic syncretist's picture

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

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.

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.

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.

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.

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.

Pareto's picture

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

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.

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.

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!

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. 

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.................

Al Huxley's picture

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

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.

q99x2's picture

Nobody needs banks anyhow. Get rid of them.

Dr. Engali's picture

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

NoDebt's picture

Stop it.  I'm getting all misty.

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?

SheepDog-One's picture

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

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

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.  

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.