- Bank shares under pressure over concern of Credit Suisse AT1 bond holders to get zero
- No stress evident here: Bank of Japan says it has had no bids for USD funding operation
- China: Evergrande reported to have creditor approval to restructure its offshore debt
- Japan chief cabinet secretary Matsuno says Japan's financial system is stable
- Sharp movement continues in Asia Monday trade - USD back up again & index futures drop
- UK manufacturing output edges higher, 2023 outlook still pessimistic
- PBOC sets USD/ CNY reference rate for today at 6.8694 (vs. estimate at 6.8701)
- PBOC LPR setting: 1-year and 5-year both unchanged, as expected
- Bank of Japan March meeting Summary of Opinions - maintaining easy monetary policy
- ICYMI - Risk on after Fed, 5 other DM central banks, turbo charge USD liquidity provision
- The quiet Fed is ready to speak
- RBA's Kent says the Bank will take account of financial conditions in deciding on rates
- US official says US banks have limited exposure to Credit Suisse
- Reserve Bank of Australia's Kent says Australian banks are undeniably strong
- US equity index trade has opened on Globex for the new week - gap up initially (d'uh)
- Goldman Sachs slash their oil price forecast: Brent to $94 (vs. $100 previously)
- More on Fed, ECB, BOJ, BOE, BOC, SNB announce coordinated intervention
- Fed, BoE, BoJ, ECB SNB, BoC to coordinate action to enhance liquidity provision
- Trade ideas thread - Monday, 20 March 2023
- Early flows into non-USD FX in early Asia after the UBS-CS deal agreed to
- ECB's Lagarde issues support statement on UBS - Credit Suisse deal
- Powell & Yellen: US bank capital, financial system resilient
- Fed interest rate decision with technical analysis and forecast
- North Korea fired what could be a ballistic missile - Japan Coast Guard
- UBS Nears Acquisition of Credit Suisse Amid Efforts to Stabilize Banking Sector
- Moody's downgrades First Republic Bank to B2 from Baa1
It was a big news Sunday afternoon/evening (US time/Europe time), which of course equates to early, illiquid Asia time. The two key events were that UBS is to buy Credit Suisse in a Swiss government-arranged deal. UBS will get CS for 3bn CHF and will receive a 9bn government guarantee alongside 100bn in liquidity assistance.
16bn CHF of high yield ‘AT1’ CS bonds will be written down to zero. These bonds were attractive when eurozone yields were zero/negative. These bondholders are left out of luck now. Bank stocks are under pressure here in the region with concern over banks' bond exposures related to this write down of AT1s.
The other big news was that the Federal Reserve, European Central Bank, Bank of Japan, Bank of England, Swiss National Bank, and Bank of Canada will switch from weekly to daily auctions for US dollars through FX swap lines. This move will make US dollar liquidity more readily available, should it be needed. This change has been been made before during crises, the GFC, for example. Most recently it was used in the early stage of the pandemic in March 2020. The change is a clear sign global authorities are very concerned about contagion risk from the bank failures in the US and Switzerland. The Sunday move is seen as getting ahead of any potential surge in contagion liquidity demand. Check the points above for more on this, especially the one regarding the Bank of Japan receiving no demand for the facility today.
Also on the central bank agenda today was a speech (and following Q&A) from Christopher Kent, Reserve Bank of Australia Assistant Governor (Financial Markets). Kent provided obligatory remarks on the stability of the Australia banking system. On monetary policy matters, in brief, he reiterated the Bank’s efforts are still focused on combating inflation and repeated that lags in policy transmission meant the full impact of RBA rate hikes so far are yet to be felt.
Still on central banks, the People’s Bank of China set its one- and five-year loan prime rates (LPRs) unchanged again. This was very widely expected given last week’s medium-term lending facility (MLF) rate was left unchanged. ICYMI though, the PBOC did slash its reserve requirement ratio (RRR) on Friday last week.
There was no data of note today.
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In early Monday trade, prior to the major markets of Japan, Singapore and Hong Kong opening New Zealand and Australia marked the USD across the majors board. EUR, CAD, GBP, AUD, NZD, yen all higher initially. As I post most have seen retracement moves to take them back to little changed for the day though.
Upon Globex opening for the week it was a similar story for US equity index futures trade. For the S&P500 emini, ES, higher, and now, as I post back to not a lot changed.
Asian equity markets:
Japan’s Nikkei 225 -1.1%
China’s Shanghai Composite +0.1%
Hong Kong’s Hang Seng -2.5%
South Korea’s KOSPI -0.5%
Australia’s S&P/ASX 200 -1.1%
US emini S&P500 contracts:
(This chart is from our charting app, which is free and can be found at this link)
