LONDON, March 30 (Reuters) - The easy-cash era is over and markets are feeling the pinch from the sharpest jump in interest rate in decades.
The collapse of U.S.-lender Silicon Valley Bank (SVB) in early March after heavy losses on its bond portfolio as rates climbed was a wake-up call for markets that monetary tightening will likely bring more pain.
Since late 2021, big developed economies including the United States, euro area and Australia have raised rates by almost 3,300 basis points collectively.
Here's a look at some potential pressure points.
1/ BANKS
Banks remain at the top of the worry list after the collapse of SVB, as well as Credit Suisse's forced merger with UBS, sparked turmoil across the banking sector.
Investors are alert to which other banks might be sitting on unrealised losses in government bonds, the prices of which have dropped sharply as rates have risen.
The SVB bond portfolio losses have highlighted similar risks for Japanese lenders' gigantic foreign bond holdings, which carry over 4 trillion yen ($30 billion) in unrealised losses.
Japanese, European and U.S. banks stocks, while off recent lows, are still well below levels seen just before SVB's collapse.
2/ DARLINGS NO MORE
As the SVB collapse showed, stress in the tech sector can quickly ripple out across the economy.
Tech firms are reversing pandemic-era exuberance, with Google owner Alphabet, Amazon and Meta in March conducting their latest rounds of layoffs after years of hiring sprees.
Housing markets in U.S. tech hubs such as Seattle and San Jose are cooling more rapidly than in other regions, real estate broker Redfin Corp says.
In commercial property, a restructuring by Pinterest will see the social media company exit office leases.
Investors wary of global stress should keep their eyes on Silicon Valley, as ructions in this major U.S. industry cause aftershocks in Europe and beyond.
3/ DEFAULT RISKS
Rising rates pose a threat to sub-investment grade companies, which have to pay up when refinancing their maturing debt and risk defaulting on it.
S&P expects U.S. and European default rates to reach 3.75% and 3.25%, respectively by September, more than double the 1.6% and 1.4% in September 2022. Pessimistic forecasts of 6.0% and 5.5% not "out of the question", it says.
Deutsche Bank strategist Jim Reid wrote this week that "corporates are more levered now than during the great financial crisis and this cycle could ultimately be more corporate default focused versus financials."
4/ CRYPTO WINTER
Having benefited from an influx of cash during the easy-money era, cryptocurrencies have felt pain as rates rose last year, then gained on recent signs that tightening could end soon.