Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY
- UBS AGREES $3.25BN RESCUE DEAL FOR RIVAL CREDIT SUISSE (FT)
- HOLDERS OF $17BN OF CREDIT SUISSE BONDS WIPED OUT UNDER UBS TAKEOVER (FT)
- FED ANNOUNCES COORDINATED PROVISION OF LIQUIDITY, CENTRAL BANKS INCLUDE CANADA, UK, JAPAN, ECB AND SWITZERLAND (MNI)
- BOJ SEES STABLE FINANCIAL SYSTEM, WARY OF RISKS (MNI)
- XI SAYS TO BOOST RUSSIA TRADE TIES, REITERATES UKRAINE STANCE (XINHUA)
Fig. 1: Asia Pac Financial Stocks Remain Under Pressure
Source: MNI - Market News/Bloomberg
EUROPE
SWITZERLAND: UBS agreed to buy Credit Suisse for $3.25bn after a frantic weekend of negotiations brokered by Swiss regulators to safeguard the country’s banking system and attempt to prevent a crisis spreading across global markets. (FT)
SWITZERLAND: Holders of $17bn of Credit Suisse bonds will have their investment wiped out following the bank’s takeover by UBS, in a surprise move that is expected to cause ructions in European debt markets when they open on Monday. (FT)
ECB: (MNI) London - The European Central Bank "welcomes" the swift action taken by the Swiss authorities leading to UBS's announced takeover of Credit Suisse, bank President Christine Lagarde said Sunday. The actions will be "instrumental" in restoring orderly market conditions and ensuring financial stability, Lagarde said in a statement by email following the announced deal. (MNI)
SNB: (MNI) LONDON - The Swiss National Bankconfirmed Sunday it will provide an additional SFR 100 billion liquidity assistance availability to facilitate UBS's takeover of Credit Suisse. (MNI)
FRANCE: Protests mount as Macron faces no-confidence vote on pensions reform. Hundreds of people were arrested across France over the weekend as protests against president Emmanuel Macron’s move to bypass parliament and raise the country’s retirement age intensified. (FT)
U.S
FED: (MNI) WASHINGTON - The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank Sunday announced a coordinated action to enhance the provision of liquidity through standing U.S. dollar liquidity swap line arrangements. (MNI)
FED: The Federal Reserve and five other central banks announced coordinated action Sunday to boost liquidity in US dollar swap arrangements, the latest effort by policymakers to ease growing strains in the global financial system.(BBG)
BANKING: US Banks on ‘Bumpy’ Path as First Republic’s Troubles Deepen. The future of SVB, First Republic remains up in the air. FDIC got a deal for one failed lender: Signature Bank. (BBG)
BANKING: A coalition of midsize US banks asked federal regulators to extend FDIC insurance to all deposits for the next two years, arguing the guarantee is needed to avoid a wider run on the banks. (BBG)
BANKING: First Republic Bank was downgraded again Sunday by S&P Global Inc., days after the ratings firm cut the lender to junk. S&P said it lowered First Republic’s long-term issuer credit rating to B+ from BB+, confirming an earlier Bloomberg report.(BBG)
BANKING: The Federal Deposit Insurance Corporation (FDIC) said the deal would see the subsidiary, Flagstar Bank, assume substantially all of Signature Bank's deposits, some of its loan portfolios and all 40 of its former branches. Roughly $60 billion of Signature Bank's loans and $4 billion of its deposits would remain with it in receivership, the agency said. (RTRS)
BANKING: A U.S. official said on Sunday that the deposit outflows that left many regional banks reeling in the wake of Silicon Valley Bank's failure had slowed and in some cases reversed, as investors tried to ascertain whether the crisis was contained. (RTRS)
BANKING: Senator Elizabeth Warren said she favors lifting the Federal Deposit Insurance Corp.’s standard $250,000 cap, possibly into the millions of dollars, after Silicon Valley Bank’s failure exposed risk at US regional banks. (BBG)
BANKING: Goldman Sachs Group Inc. traders were preparing to take bids on claims against Credit Suisse Group AG’s riskiest bonds after the takeover of the Swiss lender wiped out about 16 billion Swiss francs ($17.3 billion) of the debt. (BBG)
OTHER:
BOJ: MNI BRIEF: One Bank of Japan board member saw the need to improve market functioning in the corporate bond and swap markets, although changes to yield curve control were judged to have been effective to a certain extent, according to the summary of opinions of the March 9-10 meeting released by the BOJ Monday. (MNI)
BOJ: (MNI) TOKYO - Bank of Japan officials view the turmoil in the U.S. and European banking systems as unlikely to undermine the stability of Japan's financial system, though they are alert to global growth risks and will provide an update in April's Financial System Report, MNI understands. (MNI)
FINANCE: Some Asian banks’ additional tier 1 bonds fell by a record Monday morning, after a Swiss regulator said $17 billion of such AT1s from Credit Suisse Group AG will be wiped out. (BBG)
RBA: MNI BRIEF- Australian banks remained "unquestionably strong" and domestic financial markets continued to function well despite the global banking turmoil, said Reserve Bank of Australia Assistant Governor (Financial Markets) Chris Kent at a conference on Monday. (MNI)
OIL: Goldman Sachs Group Inc., one of the most bullish banks on its outlook for oil, has nudged its forecasts down as worries over the banking sector and the potential for recession outweigh a surge in demand from China. The bank’s analysts now see Brent reaching $94 a barrel for the 12 months ahead, and $97 a barrel in the second half of 2024, versus $100 a barrel previously. (BBG)
CHINA
CHINA/RUSSIA: China and Russia need to boost two-way trade, foster more convergence of interests and areas of cooperation, as well as raise both the quality and quantity of investment and economic cooperation and step up policy coordination, according to a signed article by Xi Jinping carried by Xinhua news agency Monday. (BBG)
ECONOMY: The cut in China’s reserve requirement ratio for banks on Friday can help bolster market confidence, guide financial institutions to increase support for the economy, and cement a recovery in growth, Financial News says in a front-page commentary on Monday.(BBG)
CHINA/TAIWAN: Former Taiwan President Ma Ying-jeou will visit China this month, his office said on Sunday, the first time a former or current Taiwanese leader has visited since the defeated Republic of China government fled to the island in 1949. (RTRS)
PROPERTY: The world’s most indebted developer has reached an agreement with a group of major creditors for a plan to restructure its offshore debt, just ahead of a key winding-up petition hearing Monday, people familiar with the matter said.(BBG)
CHINA MARKETS
PBOC NET DRAINS CNY 11 BILLION VIA OMOS MONDAY
The People's Bank of China (PBOC) conducted CNY30 billion via 7-day reverse repos on Monday, with the rates unchanged at 2.00%. The operation has led to a net drain of CNY11 billion after offsetting the maturity of CNY41 billion reverse repos today, according to Wind Information.
- The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.
- The 7-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.1484% at 09:50 am local time from the close of 2.1127% on Friday.
- The CFETS-NEX money-market sentiment index closed at 46 on Friday, compare with the close of 47 on Thursday.
PBOC SETS YUAN CENTRAL PARITY AT 6.8694 MON VS 6.9052 FRI
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.8694 on Monday, compared with 6.9052 set on Friday.
OVERNIGHT DATA
CHINA MARCH 5-YEAR LOAN PRIME RATE 4.30%; MEDIAN 4.3%; FEB 4.30%
CHINA MARCH 1-YEAR LOAN PRIME RATE 3.65%; MEDIAN 4.3%; FEB 3.65%
US TSYS: Curve Steepens In Volatile Asian Session
TYM3 deals at 115-22, -0-04, marginally off the top of the observed 0-29+ range on elevated volume of ~273k.
- Cash tsys sit 2bps cheaper to 2bps richer across the major benchmarks, the curve has twist steepened pivoting on 5s.
- Tsys opened dealing cheaper as local participants digested news of the UBS takeover over of Credit Suisse as well as the coordinated Central Bank action to enhance the provision of US Dollar Liquidity. The 2-year Yield rose as much as 17bps.
- A fall in regional bank stocks saw tsys firm off session lows. The likely wipeout of holders of Credit Suisse’s AT1 debt rattled risk sentiment.
- Fed data OIS sit level changed from closing levels on Friday, there were 23bps of hikes seen in March and May with a terminal rate of ~4.8%. Through to December 2023 there are ~100bps of cuts priced in.
- The fallout from the UBS/Credit Suisse deal as well as the US focus on regional banks will dominate today. PPI data from Germany and Eurozone trade balance headline an otherwise thin docket on Monday.
AUSSIE BONDS: Closes At Bests As U.S. Tsys Unwind Early Weakness
ACGBs close near session highs (YM +19.0 & XM +15.5) as U.S. Tsys unwind the weaker open to Asia-Pac trade following the weekend’s banking news. A decline in regional bank stocks, after news that Credit Suisse AT1 bondholders were set to be wiped out, appeared to strengthen the recovery in U.S. Tsys.
- Cash ACGBs richened 14-16bp with the 3/10 curve 2bp steeper and the AU-US 10-year yield differential -1bp at -17bp.
- Swaps curve bull steepened 2bp with rates 15-17bp lower.
- Bills strengthened 20-23bp across the strip with late whites/early reds leading.
- Ahead of the release of the RBA Minutes tomorrow, RBA dated OIS softened 20-30bp for meetings beyond May. Today’s move reinforced the message from last week that the peak in the cash rate this cycle had already been seen.
- By the close, the market had priced 37bp of easing by year-end, after receiving a boost from comments by RBA Kent regarding the elongated lags for policy this cycle as well as an acknowledgement that the banking crisis, among other issues, would be considered at the April meeting.
- The highlight of the global calendar nonetheless will be the FOMC meeting (Tue/Wed). BBG consensus expects a 25bp hike, although some analysts expect no move.
NZGBS: Stronger, Tracking U.S. Tsys’ Reaction To Weekend’s News
NZGBs opened stronger, weakened with U.S. Tsys’ initial reaction to the weekend’s banking news, before closing at or near session bests as U.S. Tsys reversed course in Asia-Pac trade. NZGBs richen 17-19bp on the day with the 2/10 curve 2bp steeper and the NZ/US 10-year yield differential -5bp.
- Swaps bull steepen 2bp with rates 17-19bp lower.
- RBNZ dated OIS closed 8-13bp softer for meetings beyond April with terminal OCR expectations at 5.21% (+46bp of additional tightening across meetings out to July). April meeting pricing settled at 22bp of tightening.
- The local calendar is scheduled to release February's Trade Balance data tomorrow. After last week’s worse-than-expected Q4 current account deficit print and resultant bond rating guidance from S&P, the release will be closely watched.
- RBNZ Chief Economist Conway is scheduled to give a speech: “The path back to low inflation in NZ” at a capital markets forum on Thursday.
- Elsewhere, the RBA Minutes, slated for release tomorrow, will provide further details on the dovish shift at the March meeting.
- The global calendar’s highlight this week however is the FOMC meeting (Tue/Wed). BBG consensus expects a 25bp hike, although some analysts expect no move.
EQUITIES: Financials Under Pressure On Fallout From UBS Takeover Of Credit Suisse
Regional equities started the day on a more positive footing, but this has given way to a more cautious tone as the session progressed. China is the only major regional market to be sitting in positive territory at this stage. Developments outside the region remain key, following the UBS takeover of Credit Suisse. EU futures were up +1.4% in early trade, but now sit comfortably back in the red, while US futures aren't too far away from flat, also giving up earlier gains.
- Financial stocks have been a particular focus point as holders of risky (AT1) Credit Suisse bonds reportedly face a $17bn wipeout. Similar bonds for regional bank names today have traded sharply lower with the region. This has weighed on Asia Pac financials, with a Bloomberg large & mid cap index for the sector off by nearly 2%.
- The HSI is off by over 2.5%, with the underlying tech sun-index down by ~3%. Weakness has also been evident in financials, with HSBC down sharply.
- China shares are modestly positive, being viewed as insulted somewhat from the global turmoil, while the RRR cut from late on Friday is also a positive at the margins. The CSI 300 is up 0.10-0.15% at this stage.
- In Japan, the Topix is off by around ~1.40%, with the underlying bank index off 1.90%. The Kospi (-0.64%) and Taiex (-0.29%) have fared slightly better.
- The ASX200 is down near 1.40%, with financial names again under pressure, with lower commodity prices also likely weighing on material stocks.
- In SEA, we are seeing modest outperformance from Thai equities.
GOLD: Consolidates After Posting Fresh YTD Highs On Friday
After surging to fresh YTD highs on Friday, gold has consolidated in the first part of trade this week. After closing last week at $1989.25, we sit comfortably lower now, last around $1974. This is around 0.75% off Friday highs, but note that gold rose last week just under 6.5%. We have seen some consolidation in terms of broader USD trends, but today's moves may represent a consolidation post strong gains last week in terms of the precious metal.
- Dips today have been supported sub the $1970 level. Below that is early Feb highs just under $1960, which could be a support point on the downside. On the topside is highs from Friday and then round figure resistance at $2000.
- Gold ETF holdings fell on the final day of trading last week, but the broader macro backdrop looks supportive of holdings given risk aversion remains elevated today.
OIL: Weaker, But Brent Avoids Fresh Test Of $72/bbl For Now
Brent crude got close to $73.75/bbl in early dealings but is now back to $72.40/bbl, which is below closing levels from the end of last week. We are off a further 0.8% so far today, after losing 11.85% last week. We are yet to test sub $72/bbl yet, with support around this region tested on 3 occasions through the tail end of last week. WTI is off by a similar amount so far today and currently sits around the $66.20/bbl level.
- Oil has followed broader risk appetite today, with limited positive follow through to the announcement that UBS will take over Credit Suisse. Regional equities are mostly weaker and EU futures are back int he red (after being as high as +1.4% earlier).
- The demand outlook amid turmoil in the global banking sector remains a focus point.
- Goldman Sachs analysts no longer see Brent reaching $100/bbl this year (with a revised $94/bbl forecast for the 12 months ahead).
- Brent prompt spreads remain weak, while the closure of a France refinery over the weekend (due to protests) also expected to weigh on near term demand.
FOREX: USD Pares Losses As Risk Appetite Wanes
The greenback was pressured in early dealing however weakness in regional equities and a retreat from early highs in EU/US equity futures has seen the USD pare its losses. The likely wipeout of holders of Credit Suisse’s AT1 debt has rattled risk sentiment.
- Kiwi is the weakest performer in the G-10 space at the margins, NZD/USD printed an early high of $0.6306 before falling ~1% as risk sentiment waned. The next downside target is the 20-Day EMA ($0.6217).
- AUD is also pressured. AUD/USD prints at $0.6680/85 ~0.2% softer, downside support comes in at $0.6590 low from March 15. RBA's Kent spoke this morning and noted that its likely to take longer than usual to see the full effect of higher rates due to the high proportion of borrowers on fixed rate loans.
- Yen is little changed, USD/JPY has dealt in a ~100 pip range. The pair firmed before paring gains as risk sentiment soured through the Asian session and US yields pulled back. The pair last prints at ¥131.75/85.
- EUR and GBP have pared early gains and both side unchanged from Friday's closing levels.
- Cross asset wise; US equity futures are unchanged, e-minis have been up as much as ~0.7%. Hang Seng is down ~2.5%. 10 Year US Treasury Yields are ~1bp lower, however they were up as much as 8bps.
- The fallout from the UBS/Credit Suisse deal as well as the US focus on regional banks will dominate today. PPI data from Germany and Eurozone trade balance headline an otherwise thin docket on Monday.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 20/03/2023 | 0700/0800 | ** |  | DE | PPI |
| 20/03/2023 | 0730/0730 |  | UK | DMO to Confirm Gilts on Offer at 4/5 April Auctions | |
| 20/03/2023 | 1000/1100 | * |  | EU | Trade Balance |
| 20/03/2023 | - | | UK | DMO Quarterly Consultation with GEMMs / Investors | |
| 20/03/2023 | 1400/1500 | | EU | ECB Lagarde Intro at ECON Hearing | |
| 20/03/2023 | 1530/1130 | * |  | US | US Treasury Auction Result for 13 Week Bill |
| 20/03/2023 | 1530/1130 | * | | US | US Treasury Auction Result for 26 Week Bill |
| 20/03/2023 | 1600/1700 | | EU | ECB Lagarde Intro as ESRB Chair at ECON |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.