US funding stress metric hits three-month high as crisis rattles regional banks

LONDON (Reuters) – A market-based indicator of stress in the U.S. banking system jumped on Monday to its highest in three months, as turmoil engulfed regional lenders following the collapse of Silicon Valley Bank.

The gap between the U.S. three-month forward rate agreement and the three-month overnight index swap rate, a funding stress indicator, rose to around 18 basis points in London trade from 23.7 bps on Thursday.

The so-called FRA/OIS spread which is used to gauge U.S. banking sector stress jumped to 18.2 bps, from closer to 12 bps last week, its highest since Dec. 22.

A U.S. official said on Sunday that the deposit outflows that left many regional banks reeling in the wake of SVB’s failure had slowed and in some cases reversed, as investors tried to ascertain whether the crisis was contained.

(Reporting by Amanda Cooper; Editing by Yoruk Baceli and Christopher Cushing)