Wednesday, April 21, 2021
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HomeBank Capital'Capital holiday' expiration looms; retail stock traders target Rocket Cos.

‘Capital holiday’ expiration looms; retail stock traders target Rocket Cos.

Wall Street Journal

Holiday deadline looms

The recent drop in Treasury bond prices might get even worse if a “capital holiday” that incentivizes banks to hold government bonds isn’t extended before it expires at the end of the month. “Some investors say banks selling Treasurys would stand to push yields higher still.”

“A special exemption allowing banks to hold less capital compared with the size of their balance sheets is due to expire March 31. The exemption enables large banks to exclude their holdings of Treasurys and central bank reserves when working out how much capital they need to meet a standard known as the Supplementary Leverage Ratio. The banks will need more capital to hit the same ratio levels if the exemption is allowed to expire, which often means selling Treasurys.”

Cash available

The Small Business Administration on Wednesday “released new guidance on changes to the Paycheck Protection Program” to make it “more attractive to the smallest firms” as loan requests “are running well below last year’s heady pace.” As of February 28 the SBA had approved 2.2 million PPP loans totaling about $156 billion, “just over half the funds available during the newest round.”

Lenders want Congress to extend the PPP’s expiration date past March 31, “citing rules that have yet to be issued and the need for legislative fixes,” American Banker reports.

What goes up …

Individual investors looking to squeeze short sellers have picked a new target: Rocket Cos., parent of Quicken Loans, the country’s largest mortgage lender. “Nearly 377 million shares traded hands on Tuesday alone, more than a 10-fold increase from the previous day. After surging 71% on Tuesday, the stock lost some steam on Wednesday, falling 33%, or $13.59, to $28.01. Trading of Rocket shares was halted several times this week because of its volatility.”

“Like GameStop, Rocket is heavily shorted. Individual investors on WallStreetBets, the Reddit community that gave birth to GameStop’s rise, have been encouraging each other to buy the stock in recent days and sharing evidence of their own massive gains. They have relished in the company’s name, Rocket, an apt one for their goal of higher prices.”

Under review

Cryptocurrency exchange Coinbase, which last week filed to go public with the Securities and Exchange Commission, “said its services may have been used by individuals, entities or jurisdictions subject to U.S. sanctions regulations and has disclosed the activity to a federal agency.” In its prospectus, Coinbase “said it hasn’t faced monetary penalties or other enforcement actions related to the disclosures or subpoenas, but that some of its disclosures are still under review by the U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC, which enforces U.S. sanctions.”

Financial Times

Only 5% down

“The U.K.’s five largest banks have agreed to support a new government scheme that aims to help…

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