Financial and REIT stocks rise in premarket after positive Fed borrowing data, as banks lean into new lending program

Financial sector and REIT stocks rose in premarket trades on Friday after weekly data on commercial bank borrowing from the U.S. Federal Reserve signaled less stress on the U.S. financial system. Among the gainers, Spirit Realty Capital Inc. (SRC), Zions Bancorp N.A. (ZION) and Moody's Corp. (MCO) are all up by 3%, while SL Green Realty Corp. (SLG) is up 2.9% and Starwood Property Trust (STWD) is ahead by 2.7%. First Republic Bank (FRC) is up by 1% and PacWest Bancorp (PACW) is up by 1.4%. Brixmor Property Group (BRX) is up by 3%. Banks borrowed $153 billion from the Fed in the week ended March 29, down from $164 billion in the week before that, according to data released Thursday. The numbers suggest a sign of stabilization after the collapse of Silicon Valley Bank and Signature Bank earlier this month. Banks pivoted their borrowing to the Fed's Bank Term Funding Program (BTFP) enacted on March 12, as Fed lending from this bucket increased by $10.7 billion to $64.4 billion as of March 29. Fed discount window borrowing fell to $88.2 billion from $110.5 billion. Jefferies banking analyst Ken Usdin noted Friday that rotation into the Bank Term Funding Program (BTFP) is a sign of better pricing terms compared to the Fed's discount window. "Further, banks can pledge government guaranteed securities for par value through the BTFP versus going to the discount window and taking asset haircuts," Usdin said. "That said, the discount window accepts a broader range of collateral (including loans)."

-Steve Gelsi

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03-31-23 0737ET

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