Ed joined BNN for an interview this afternoon, where he gave his perspective on the ongoing problems in the banking sector. He began by remarking how we have to recognize that the new market for AT1 debt was done in a very “ad hoc” way, and that we shouldn’t expect to see this spread to other bonds. The situation will put a bit of a “taint” over the market, but prior complacency will be addressed and it should get sorted out in the long term. According to Ed, central banks did a good job during the UBS takeover of Credit Suisse, and it’s “unfortunate” that the AT1 write-down is not helping to contain market panic. He emphasized that the banking and the bond markets need to be viewed separately, and the fixed income market should not be affected much by isolated banking problems. What happened at Silicon Valley was an outlier caused by its failure to properly understand interest rate risk, and the failure of regulators to catch it in time. Ed continued by saying that hedging costs for banks are negligible and should not be causing any issues. Finally, Ed touched on the key issue facing central banks at this time, which is inflation versus financial instability. There is a “decent chance” that we have resolved the global banking panic, but this is not certain. He expects that the Fed will talk down the banking problems but will still use interest rates to prioritize inflation, though possibly with a less aggressive rate hike of 25 basis points rather than the 50 expected before the banking problems.