The 2008 market is very different from today because where many banks today are leveraged heavily in U.S. treasuries, in 2008 banks' collateral were subprime mortgages that were foreclosing. U.S. treasuries are incredibly safe and secure given they are backed by the U.S. government. Principal and interest is always paid out on these at maturity of the notes' term. While some banks are over leveraged in these and need to prematurely sell some at loses to better diversify their portfolios, U.S. treasuries are still fundamentally good collateral where subprime mortgages are not.
A group of regional banks failed to balance their portfolios that were over leveraged in U.S. treasuries after the Fed started raising rates. These banks gambled by not taking early smaller losses by prematurely selling some of their treasury notes to better balance their portfolios because they didn't anticipate having the liquidity issues they faced when their customers panicked and withdrew far more than 10% liquidity reserves the banks held.
On a broader scale, it is quite possible that this will influence the Fed to slow down their rate hikes. We've already seen projections shift over the last couple weeks from a .5% expected hike drop to .25%.
Major banks are adding BILLIONS to their portfolios from customers who are no longer comfortable banking with a non-major bank. This will allow major banks to offer even lower rates given their money supply increasing tremendously as consumers are transferring their accounts to bigger banks.
For buyers shopping now – a sustained rate drop will be a welcome boost to buyer's entering the market, but we will be watching the situation closely to see how the market is affected.
