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☆ Uncertainty reigns as Fed mulls whether to raise interest rates
▼ + stars: | 2023-03-20 | by ( Lindsay Dunsmuir | ) www.reuters.com time to read: +3 min

"I don't think the Fed has any good options here," said Tim Duy, chief U.S. economist at SGH Macro Advisors. "The risk is allowing inflation to become even more embedded versus the risk of aggravating a broader banking crisis." The investment bank then expects three more 25 basis point hikes in May, June, and July, with the policy rate peaking in the 5.25-5.5% range. "We think Fed officials will therefore share our view that stress in the banking system remains the most immediate concern for now." Reporting by Lindsay Dunsmuir; Editing by Andrea RicciOur Standards: The Thomson Reuters Trust Principles.

In a package engineered by Swiss regulators on Sunday, UBS will pay 3 billion Swiss francs ($3.23 billion) for 167-year-old Credit Suisse Group AG (CSGN.S) and assume up to $5.4 billion in losses. Investor focus has now shifted to the massive blow some Credit Suisse bondholders will take, adding to anxiety about other banking sector risks including contagion and the fragile state of U.S. regional lenders. UBS acquiring Credit Suisse for 3 billion francs a week ago would have seemed like a terrific deal. Buildings of Swiss banks UBS and Credit Suisse are seen on the Paradeplatz in Zurich, Switzerland March 20, 2023. QUESTIONS FOR UBSThe deal to buy Credit Suisse will make UBS Switzerland’s only global bank and the Swiss economy more dependent on a single lender.

European bank shares slumped, with an index of leading lenders (.SX7P) down 5.8%. Credit Suisse shares slumped 62%, reflecting the huge loss its shareholders will see in their investment in the bank. Monetary authorities in Singapore and Hong Kong, where Credit Suisse hosts large regional offices, separately said the Swiss bank's business continued without interruption. And Credit Suisse urged its staff to go to work, according to a memo to staff seen by Reuters. Credit Suisse staff arriving to work in Hong Kong and Singapore on Monday morning, however, fretted about retrenchments and retaining business.

The European Central Bank vowed to support euro zone banks with loans if needed, adding the Swiss rescue of Credit Suisse was "instrumental" in restoring calm. There are also concerns about what happens next at Credit Suisse and what that means for investors and employees. The Swiss central bank said Sunday's deal includes 100 billion Swiss francs ($108 billion) in liquidity assistance for UBS and Credit Suisse. Credit Suisse shares had lost a quarter of their value last week. The bank was forced to tap $54 billion in central bank funding as it tries to recover from scandals that have undermined confidence.

☆ 'Shotgun wedding': What the UBS rescue of Credit Suisse means for global markets
▼ + stars: | 2023-03-20 | by ( Elliot Smith | ) www.cnbc.com time to read: +6 min

Axel Lehmann, chairman of Credit Suisse Group AG, left, and Colm Kelleher, chairman of UBS Group AG, during a news conference in Bern, Switzerland, on Sunday, March 19, 2023. "The accelerating loss of confidence and the escalation over the last few days have made it clear that Credit Suisse can no longer exist in its current form," Lehmann said. In equal parts "shotgun wedding" and arranged marriage, UBS agreed to buy stricken domestic rival Credit Suisse for 3 billion Swiss francs ($3.25 billion) on Sunday. The government will offer a loss guarantee of up to 9 billion Swiss francs, with UBS assuming the first 5 billion of potential losses. Shares of both UBS and Credit Suisse plunged on Monday morning, however.

☆ FDIC to break up SVB, seeks separate sale of private unit
▼ + stars: | 2023-03-20 | by ( ) www.reuters.com time to read: +2 min

March 20 (Reuters) - The Federal Deposit Insurance Corporation on Monday decided to break up Silicon Valley Bank (SVB) and hold two separate auctions for its traditional deposits unit and its private bank after failing to find a buyer for the failed lender last week. It will seek bids for Silicon Valley Private Bank until March 22 and for the bridge bank until March 24. The private bank, which is housed within SVB's retail operations, caters to high net-worth individuals. Last week, sources told Reuters that the FDIC was planning to relaunch the sale process for SVB, with the regulator seeking a potential break-up of the failed lender. The parent company of the lender SVB Financial Group had on Friday filed for a reorganization under Chapter 11 bankruptcy protection and sought buyers for its assets after steps to shore up investor confidence failed.

☆ Stocks making the biggest moves premarket: First Republic, UBS, Enphase Energy
▼ + stars: | 2023-03-20 | by ( Pia Singh | ) www.cnbc.com time to read: +2 min

First Republic — The bank tumbled about 19% premarket after Standard & Poor's cut its credit rating again, to B+ from BB+, on Sunday. S&P first lowered First Republic's credit rating to junk status last week. UBS , Credit Suisse — Shares of UBS fell about 5% before the U.S. open, while Credit Suisse shares plunged 58%. Some analysts said UBS's forced Credit Suisse merger over the weekend could boost investor sentiment toward U.S. regionals. Zions Bancorp.

☆ Uncertainty reigns as Fed considers interest rate hike
▼ + stars: | 2023-03-20 | by ( Lindsay Dunsmuir | ) www.reuters.com time to read: +4 min

The U.S. central bank will begin its two-day policy meeting on Tuesday as policymakers consider whether still too-hot inflation merits an interest rate hike or whether turmoil in financial markets outstrips those concerns. "I don't think the Fed has any good options here," said Tim Duy, chief U.S. economist at SGH Macro Advisors. Prices of Fed funds futures reflected a roughly 70% probability of a quarter-percentage point rate hike on Monday versus about a 30% chance of no change, a slight firming in expectations compared to the end of last week. The tumult has occurred during the central bank's premeeting blackout period that prevents officials from offering public clarity on their assessment of the situation. The investment bank then expects three more 25 basis point hikes in May, June, and July, with the policy rate peaking in the 5.25-5.5% range.

☆ U.S. bank crisis 'unlikely' to spill over to Canada, analysts say
▼ + stars: | 2023-03-20 | by ( Divya Rajagopal | ) www.reuters.com time to read: +4 min

"The U.S. contagion is unlikely to spill over to Canadian banks as the issues in U.S. are unique and specific to certain business models or lending activities," said James Shanahan, banking analyst with Edward Jones to Reuters. REGIONAL BANK SCRUTINYCanadian banks emerged stronger from the 2008 global financial crisis due to prudent regulations and since built a reputation for financial stability. The Canadian banks have kept their focus on domestic lending and majority of their earnings come from serving local clients. But in recent years, Royal Bank, BMO, TD Bank and CIBC (CM.TO) have expanded into the United States by buying regional lenders to benefit from strong growth in second-tier U.S. cities. However, last week the regional bank's stock was hit after the SVB collapse.

☆ Hedge fund manager Nelson Peltz says the government should insure all bank deposits — for a price
▼ + stars: | 2023-03-20 | by ( Jesse Pound | ) www.cnbc.com time to read: +3 min

The federal government should expand its guarantee to all bank deposits regardless of size in order to slow bank runs, but it should charge customers for that insurance, hedge fund manager Nelson Peltz said Monday. The additional insurance premium would, for example, could come out of the CD interest payments on large deposits, Peltz said. The hedge fund manager is not the only person calling for raising the insurance threshold. Regional bank stocks were largely rebounding on Monday, though First Republic was still under pressure despite receiving $30 billion in deposits from other banks. Peltz said it was important to make changes to the deposit insurance program even if the current situation stabilizes.

☆ First Republic shares slide 18% Monday after a credit rating downgrade
▼ + stars: | 2023-03-20 | by ( John Melloy | ) www.cnbc.com time to read: +2 min

A trader works at the post where First Republic Bank stock is traded on the floor of the New York Stock Exchange (NYSE) in New York City, March 16, 2023. S&P cut its credit rating to B+ from BB+ on Sunday after first lowering it to junk status just last week. Shares of First Republic Bank , which have become the barometer of the regional bank crisis, slid once again Monday after Standard & Poor's cut the credit rating of the San Francisco-based institution. On Thursday, a group of major banks agreed to deposit $30 billion in First Republic to shore up confidence in regional banks. Credit Suisse executives noted that the U.S. regional bank crisis caused enough instability that forced the already shaky institution to merge with its rival.

☆ Elizabeth Warren Calls for Investigation of SVB and Signature Bank Collapses
▼ + stars: | 2023-03-19 | by ( Bryan Mena | ) www.wsj.com time to read: 1 min

Sen. Elizabeth Warren (D., Mass.) says Silicon Valley Bank and Signature Bank executives must be held accountable for the banks’ failures. Sen. Elizabeth Warren (D., Mass.) called for an investigation into the recent failures of two U.S. regional banks, Silicon Valley Bank and Signature Bank. She said preliminary results from the investigation should be provided within 30 days.

☆ FDIC to relaunch sale of SVB, moves toward break-up plan
▼ + stars: | 2023-03-19 | by ( David French | ) www.reuters.com time to read: +2 min

March 19 (Reuters) - The U.S. Federal Deposit Insurance Corp (FDIC) is planning to relaunch the sale process for Silicon Valley Bank (SIVB.O) after failing to attract buyers in its latest auction, with the regulator seeking a potential break-up of the failed lender, according to people familiar with the matter. One of the options under consideration by the regulator is a sale process for the private bank of SVB for which bids are due on Wednesday, according to one of the sources, who requested anonymity as these discussions are confidential. The private bank, which is housed within SVB's retail operations, caters to high net-worth individuals. Bids for the whole of SVB were due on Sunday. Bloomberg News reported on the FDIC's plans to break up SVB earlier on Sunday.

☆ UBS mulls Credit Suisse takeover amid US bank fallout: What you need to know
▼ + stars: | 2023-03-19 | by ( ) www.reuters.com time to read: +2 min

DEVELOPMENTS* A takeover of Credit Suisse (CSGN.S) by UBS (UBSG.S) could see the Swiss government offer a guarantee against the risks involved, two people with knowledge of the matter said. * U.S. investment giant BlackRock (BLK.N) denied a report in the Financial Times that it was participating in a rival bid for all or parts of Credit Suisse. * The lightning speed of the banking industry's descent into turmoil has shaken global markets and governments, reviving eerie memories of the global financial crisis. * Goldman Sachs cut its recommendation on exposure to European bank debt to neutral from overweight, saying a lack of clarity on Credit Suisse's future path would put pressure on the broader sector. Fed faces calls to pause* Bank panic raises specter of 2008, may bring lasting changeCompiled by Reuters editorsOur Standards: The Thomson Reuters Trust Principles.

☆ Analysis: Asset concerns weigh on U.S. regional bank deal talks
▼ + stars: | 2023-03-19 | by ( David French | ) www.reuters.com time to read: +5 min

The investment portfolios where the regional banks have parked the deposits of their clients comprise mainly Treasuries and other securities, such as mortgage bonds. Some of the loan books of these banks are also underwater, due to high rates and concerns about an economic slowdown. Another complication in cutting a deal with regional banks is the uncertainty over the interest rate outlook, said a lawyer who works on transactions involving banks. Those studying deals and trying to assess the future value of regional banks are hoping for clarity on how aggressively the central bank will move to raise rates further, the lawyer said. MUDDLING THROUGHIt is unclear how long some regional banks can muddle through without a deal.

The terms of the deal will see Credit Suisse shareholders receive 1 UBS share for every 22.48 Credit Suisse shares they hold. "This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. The Swiss National Bank pledged a loan of up to 100 billion Swiss francs ($108 billion) to support the takeover. UBS initially offered to buy Credit Suisse for around $1 billion Sunday, according to multiple media reports. It reported a full-year net loss of 7.3 billion Swiss francs for 2022 and expects a further "substantial" loss in 2023.

He now faces renewed criticism over his agenda at the Fed, where he oversaw efforts to reduce regulations on regional banks. U.S. regional banks are expected to pay higher rates to depositors to keep them from switching to larger lenders, leaving them with higher funding costs. In 2008, regulators had to contend with billions of dollars in toxic mortgages and complex derivatives sitting on bank books. Currently, regional banks below $250 billion in assets have simpler capital, liquidity and stress testing requirements. "SVB is not a very complicated bank," said Dan Awrey, a Cornell Law professor and bank regulation expert.

Credit Suisse Chief Financial Officer Dixit Joshi and his teams will hold meetings over the weekend to assess strategic scenarios for the bank, people with knowledge of the matter said on Friday. Swiss regulators are encouraging UBS and Credit Suisse to merge but neither bank wanted to do so, one source said. The boards of UBS and Credit Suisse were expected to separately meet over the weekend, the Financial Times said,Credit Suisse shares jumped 9% in after-market trading following the FT report. Credit Suisse and UBS declined to comment. Efforts to shore up Credit Suisse come as policymakers including the European Central Bank and U.S. President Joe Biden sought to reassure investors and depositors the global banking system is safe.

A source with knowledge of the matter said that Swiss regulators are encouraging UBS and Credit Suisse to merge, but that both banks do not want to do so. Credit Suisse shares jumped 9% in after-market trading following the FT report. Credit Suisse and UBS declined to comment on the report. "Credit Suisse is a very special case," said Frédérique Carrier, head of investment strategy at RBC Wealth Management. The supervisors were told deposits were stable across the euro zone and exposure to Credit Suisse was immaterial, a source familiar with the meeting's content told Reuters.

Credit Suisse declined to comment on the banks' actions. MARKET TROUBLES LINGERBanking stocks globally have been battered since Silicon Valley Bank collapsed, raising questions about other weaknesses in the wider financial system. A view of the Park Avenue location of the First Republic Bank, in New York City, U.S., March 10, 2023. The supervisors were told deposits were stable across the euro zone and exposure to Credit Suisse was immaterial, a source familiar with the meeting's content told Reuters. "Japan's financial system remains stable as a whole," Kishida told a news briefing.

☆ US consumer sentiment deteriorates in March, inflation expectations retreat
▼ + stars: | 2023-03-17 | by ( Lucia Mutikani | ) www.reuters.com time to read: +6 min

SummarySummary Companies Consumer sentiment slips in MarchInflation expectations easeManufacturing production edges up 0.1% in FebruaryWASHINGTON, March 17 (Reuters) - U.S. consumer sentiment fell for the first time in four months in March, but households expected inflation to subside over the next year and beyond, which could offer some relief to the Federal Reserve as it confronts financial market instability. The University of Michigan's preliminary March reading on the overall index of consumer sentiment came in at 63.4, down from 67 in the prior month. While the correlation between consumer sentiment and spending is weak, economists expect tighter financial conditions will undercut consumption and push the economy into recession. A separate report from the Conference Board showed its Leading Economic Index, a gauge of future economic activity, dropped for an 11th straight month in February. Durable manufacturing production nudged up 0.1%, while nondurable manufacturing output climbed 0.2%.

March 17 (Reuters) - Credit Suisse and First Republic Bank shares came under renewed pressure on Friday despite multibillion-dollar support deals, while a source said European Central Bank supervisors see no contagion for euro zone banks from the turmoil. With investor confidence far from restored, analysts, investors and bankers think the loan facility has only bought Credit Suisse some time to work out what to do next. Meanwhile, U.S. regional bank shares, including PacWest Bancorp (PACW.O), also opened sharply lower, with First Republic down around 25%. But the supervisors were told deposits were stable across the euro zone and exposure to Credit Suisse was immaterial, a source familiar with the meeting's content told Reuters. The ECB pressed forward with a 50 basis-point rate hike, arguing that euro zone banks were in good shape and that if anything, higher rates should bolster their margins.

☆ U.S. consumer sentiment ebbs in March; inflation expectations ease
▼ + stars: | 2023-03-17 | by ( ) www.reuters.com time to read: +6 min

SummarySummary Companies Consumer sentiment slips in MarchInflation expectations easeManufacturing production edges up 0.1% in FebruaryWASHINGTON, March 17 (Reuters) - U.S. consumer sentiment fell for the first time in four months in March, but households expected inflation to subside over the next year and beyond, which could offer some relief to the Federal Reserve as it confronts financial market instability. The University of Michigan's preliminary March reading on the overall index of consumer sentiment came in at 63.4, down from 67 in the prior month. Durable manufacturing production nudged up 0.1%, while nondurable manufacturing output climbed 0.2%. Mining output fell 0.6%, with oil and gas well drilling dropping 3.1%. Industrial productionCapacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, dipped 0.1 percentage point to 77.6% in February.

U.S. Treasury yields extended a slide after data showed March U.S. consumer sentiment fell for the first time in four months. Credit Suisse's chief executive said on Friday the bank was working hard to stem customer outflows, although this could take time. The STOXX 600 (.STOXX) index fell 2.21%, while Europe's broad FTSEurofirst 300 index (.FTEU3) dropped 22.85 points, or 1.31%. The U.S. 2-year Treasury yield , which is sensitive to shifts in interest rate expectations, fell to 3.9835% compared with a previous close of 4.13%. The benchmark German 10-year yield fell to 2.099% versus 2.243% previously .

☆ US manufacturing output ekes out gains in February
▼ + stars: | 2023-03-17 | by ( ) www.reuters.com time to read: +3 min

Manufacturing output gained 0.1% last month, the Federal Reserve said on Friday. Durable manufacturing production nudged up 0.1%, while nondurable manufacturing output climbed 0.2%. The small gain in manufacturing, together with the rise in utilities, offset the drop in mining, leaving overall industrial production unchanged last month. Industrial output rose 0.3% in January. Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, dipped 0.1 percentage point to 77.6% in February.

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