With the Fed pumping $118 million per hour [4] into excess (and fungible) reserves into the banking system, the market has once again front-run the exuberance expected from the CCAR (or bank stress tests). Sadly, just as we saw last year [5], the 'hope' priced into US financial stocks is absolutely not priced into US financial credit markets and the strange case of deja vu all over again that we saw in last year's stress test makes us wonder why all those professional investors aren't snapping up the 'cheap' debt of the banks - unless they are well aware of reality. Of course, as we noted last year [6], the combination of pure economic guesswork and financial analysis leaves belief in the Stress Tests a total 'act of faith' and it seems, once again, credit markets don't believe.
[7]
Charts: Bloomberg