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☆ European banks default-risk indicator jumps, AT1 bonds fall
▼ + stars: | 2023-03-24 | by ( ) www.reuters.com time to read: +2 min

Deutsche Bank's (DBKGn.DE) five-year credit default swaps (CDS) jumped 19 basis points (bps) from Thursday's close to 222 bps, data from S&P Global Market Intelligence showed. UBS's (UBSG.S) five-year CDS also shot up 14 bps from Thursday's close to 130 bps, the data showed. European banks' Additional Tier 1 (AT1) debt also came under fresh selling pressure, with Deutsche and UBS AT1s down around four and two cents in price, respectively, according to Tradeweb data. Although European regulators and authorities in Asia have said this week they would continue to impose losses on shareholders before bondholders - unlike the treatment of bondholders at Credit Suisse - unease lingers. Reporting by Chiara Elisei and Amanda Cooper; Writing by Dhara Ranasinghe; Editing by Susan FentonOur Standards: The Thomson Reuters Trust Principles.

SummarySummary Companies European banks, bonds, CDS sell offDeutsche Bank CDS rise to highest since late 2018Confidence hurt, outlook dimsLONDON, March 24 (Reuters) - Confidence in European banks deteriorated further on Friday, with the cost of insuring against a debt default rising sharply as the profit outlook for the sector dimmed. Deutsche Bank's (DBKGn.DE) five-year credit default swaps (CDS) jumped 19 basis points (bps) from Thursday's close to 222 bps, rising to their highest since late 2018, data from S&P Global Market Intelligence showed. The prospect that interest rates may be close to peaking, as financial markets are signalling, would also curb banks' profit margins on lending. BOND WATCHEuropean banks' Additional Tier 1 (AT1) debt came under fresh selling pressure, with Deutsche AT1 prices down 6 cents, according to Tradeweb data. The selloff in AT1s highlighted concerns about rising funding costs for European banks and helped explain why the sector was facing renewed pressure on Friday, analysts said.

☆ Take Five: And let there be calm
▼ + stars: | 2023-03-24 | by ( ) www.reuters.com time to read: +5 min

LONDON, March 23 (Reuters) - At the incredible end to the first quarter for financial markets, rattled by bank turmoil, some stability will be much hoped for in coming days. SNB chief Thomas Jordan reckons the next two weeks will be vital to securing UBS's Credit Suisse takeover. Market cap of US regional banks included in the S&P 500 regional bank index3/ DID YOU SAY AT1? Potential legal action is also possible after Swiss authorities ruled that holders of Credit Suisse AT1 bonds would get nothing in the deal. And U.S. and European banks turmoil show how quickly a crisis can surface, giving Ueda even more reason for caution.

☆ Central banks stick to rate hikes with eye on market turmoil
▼ + stars: | 2023-03-23 | by ( ) www.reuters.com time to read: +5 min

Overall, 10 developed economies have raised rates by a combined 3,290 basis points (bp) in this cycle to date. Reuters Graphics1) UNITED STATESThe Fed raised rates by a quarter point on Wednesday, continuing its most aggressive series of hikes since the 1980s. After setting its policy rate to 4.75%-5.00%, the Fed hinted it may soon pause rate rises. Reuters Graphics3) CANADAThe Bank of Canada on March 8 became the first major central bank to halt monetary tightening during this cycle. Reuters Graphics5) AUSTRALIAAustralia's central bank raised its key rate by a quarter point to 3.6% in March, the highest since May 2012, but hinted rate hikes may be over for now.

Britain and Norway hiked rates by 25 bps each, the Swiss National Bank jacked up rates by 50 bps. The European Central Bank hiked rates by 50 bps a week ago. ClearBridge strategist Jeffrey Schluze said, European banking regulation since the global financial crisis has been more stringent than in the United States, making the outlook for European lenders relatively strong. While banking stocks have been battered globally, the S&P 500 is up 0.5% this month (.SPX), while Europe's STOXX 600 index down 3.2% (.STOXX). CHANGE IN TONEBefore the banking turmoil, markets were driven by one-way moves as high inflation pressured U.S. and European markets.

LONDON, March 23 (Reuters) - Credit Suisse (CSGN.S) bondholders are seeking legal advice after the Swiss regulator ordered 16 billion Swiss francs ($17.5 billion) of Additional Tier-1 (AT1) debt to be wiped out under its rescue takeover by UBS (UBSG.S). Not only did bondholders expect protection, but UBS is paying $3.23 billion to Credit Suisse shareholders. One Paris-based manager of a debt fund that held Credit Suisse AT1s said he had been "spammed" with emails from lawyers. Facing any challenge could be Credit Suisse, its new owner UBS, Swiss regulator FINMA or the Swiss government. It also cited an emergency March 19 ordinance which it said authorised FINMA to instruct Credit Suisse to write off the bonds.

Fed Chairman Jerome Powell sought to reassure investors about the soundness of the banking system, saying that the management of Silicon Valley Bank "failed badly," but that the bank's collapse did not indicate wider weaknesses in the banking system. "These are not weaknesses that are running broadly through the banking system," he said, adding that the takeover of Credit Suisse seemed to have been a positive outcome. The Federal Open Market Committee policy statement also said the U.S. banking system is "sound and resilient." The much-anticipated rate cut by the Fed, which had delivered eight previous rate hikes in the past year, sought to balance the risk of rampant inflation with the threat of instability in the banking system. The banking sector has been in turmoil after California regulators on March 10 closed Silicon Valley Bank in the largest U.S. bank failure since the 2008 financial crisis.

The latest move to restore calm to restive regional bank stocks came as Pacific Western Bank (PACW.O), one of the regional lenders caught up in the market volatility, said it had raised $1.4 billion from investment firm Atlas SP Partners. While that deal brought some respite to battered banking stocks, First Republic (FRC.N) remains firmly in the spotlight. For now, the rescue of Credit Suisse appears to have calmed the worst fears of systemic contagion, boosting shares of European banks (.SX7P) and U.S. lenders (.SPXBK). Reuters Graphics Reuters Graphics'HEAD IN SAND'The wipeout of Credit Suisse's Additional Tier-1 (AT1) bondholders has sent shockwaves through bank debt markets. Seeking to boost confidence among investors rattled by its $3 billion Credit Suisse rescue, UBS said on Wednesday it would buy back 2.75 billion euros ($2.96 billion) worth of debt it issued less than week ago.

UBS is buying back the bonds at the price at which they were sold rather than at market prices, compensating investors after a sell-off this week. UBS shares and bonds have seesawed this week as investors assess the impact of the Credit Suisse deal. The prices of the bonds UBS is buying back on Wednesday had also tumbled but partially recovered on Tuesday. "The issuer has decided to launch this exercise as a result of a prudent assessment of these recent developments and the issuer's long-term commitment to its credit investors," UBS said in its statement. UBS shares were last down 2.3% at 18.97 Swiss francs ($21.05), having risen as much as 3.6%.

☆ World stocks cautiously higher ahead of high stakes Fed decision
▼ + stars: | 2023-03-22 | by ( Dhara Ranasinghe | ) www.reuters.com time to read: +4 min

[1/5] A man shelters under an umbrella as he walks past the London Stock Exchange in London, Britain, August 24, 2015. Data showing British inflation unexpectedly rose to 10.4% in February boosted expectations for a quarter point rate hike at Thursday's Bank of England meeting, lifting sterling. While London's FTSE stock index dipped (.FTSE), European stock markets more broadly edged higher (.STOXX) while Asia-Pacific shares outside Japan (.MIAPJ0000PUS) added 1.3%. The spotlight was firmly on the Fed, which concludes a two-day meeting later on Wednesday. "Plus, delivery of a 25 bps hike still means the Fed is tightening, there is likely at least another hike to come."

☆ UK inflation sucker-punches the BoE, while sterling bulls cheer
▼ + stars: | 2023-03-22 | by ( Amanda Cooper | ) www.reuters.com time to read: +4 min

British consumer price inflation (CPI) rose to 10.4% in February from January's 10.1%, above all economists' forecasts in a Reuters poll and almost back to where it was in December. "Core CPI missed by 0.5% - that's one of the biggest, if not the biggest misses on CPI in the recent series of inflation data. "The market is going to be second-guessing (the BoE) right now - it's difficult to assume there's just one more rate hike left in the tank," she said. RLAM's Nicholl noted recent data, such as employment, business activity and manufacturing, had shown strength, and consumer spending has held up. Derek Halpenny, EMEA head of research for global markets at Nomura said January and February's combined annual inflation rate of 9.67% makes for a "mildly supportive" outlook for the pound.

☆ Stocks, bond yields fall as Fed, with eye on inflation, signals pause
▼ + stars: | 2023-03-22 | by ( Koh Gui Qing | ) www.reuters.com time to read: +5 min

Markets initially interpreted the omission as a sign that rates might be peaking, and drove Treasury yields to session lows after the Fed's statement was released. The two-year yield , which falls with traders' expectations of a less hawkish Fed, fell to 3.9597% from Tuesday's close of 4.177%. Data also showed British inflation unexpectedly rose to 10.4% in February, lifting expectations for a quarter point rate hike at Thursday's Bank of England meeting, boosting sterling. German two-year yields overnight recorded the biggest daily jump since 2008 as markets went back to pricing in more ECB hikes. The dollar index fell on the Fed's dovish note, shedding 0.62%, and a softer dollar lifted the yen to 131.39 .

☆ Analysis: Market turmoil is doing central bankers' jobs for them
▼ + stars: | 2023-03-21 | by ( Yoruk Bahceli | ) www.reuters.com time to read: +5 min

European Central Bank President Christine Lagarde reckons market turmoil may do some of the ECB's tightening for it if it dampens demand and inflation. Financial conditions reflect the availability of funding in an economy, so they dictate spending, saving and investment plans of businesses and households. Central banks have been trying to tighten them by raising rates to slow rising prices. Signs of tightening financial conditions were plentiful. "Central banks no longer have a good idea about the true tightness of monetary policy," he said.

LONDON, March 20 (Reuters) - Bank of America's electronic stocks desk has halted trading with a desk at Credit Suisse that uses computer-led strategies, "out of an abundance of caution effective today," an email seen by Reuters on Monday said. Bank of America (BAC.N) said it would no longer send trades to Credit Suisse's "ATS Crossfinder". That trading platform anonymously matches buy and sell orders for the same kinds of securities, according to the Credit Suisse (CSGN.S) website. Bank of America sent the email to traders and hedge fund clients on Monday morning. Credit Suisse declined to comment on the email and Bank of America also declined to comment.

LONDON, March 20 (Reuters) - Lawyers from Switzerland, the United States and UK are talking to a number of Credit Suisse (CSGN.S) Additional Tier 1 (AT1) bond holders about possible legal action after the state-backed rescue of Credit Suisse by UBS (UBSG.S) wiped out AT1 bonds, law firm Quinn Emanuel Urquhart & Sullivan said on Monday. Quinn Emanuel said it was in discussions with Credit Suisse AT1 bondholders representing a "significant percentage" of the total notional value the instruments. PIMCO had 3.49% of its 5.66 billion euro ($6.06 billion) GIS Capital Securities Fund in Credit Suisse AT1 bonds, the Morningstar data showed. Lazard Asset Management had 7.4% of its 1.45 billion euro Lazard Capital Fi SRI fund allocated to Credit Suisse AT1 debt. GAM's 1.15 billion euro Star Credit Opportunities fund's exposure to Credit Suisse AT1 debt was 4.81% at the end of last month, based on the Morningstar data.

☆ Possible legal action by some Credit Suisse AT1 bondholders discussed - law firm
▼ + stars: | 2023-03-20 | by ( ) www.reuters.com time to read: +1 min

LONDON, March 20 (Reuters) - A team of lawyers from Switzerland, the United States and UK are talking to a number of Credit Suisse (CSGN.S) Additional Tier 1 (AT1) bond holders about possible legal action after the state-backed rescue of Credit Suisse by UBS wiped out AT1 bonds, law firm Quinn Emanuel Urquhart & Sullivan said on Monday. Quinn Emanuel said they are in discussions with Credit Suisse AT1 bond holders representing a "significant percentage" of the total notional value the instruments. Just over $17 billion worth of Credit Suisse bonds, known as Additional Tier 1 or AT1, debt will be written down to zero on the orders of the Swiss regulator as part of a merger. A call for bondholders is likely to be convened to take place on Wednesday, 22 March, Quinn Emanuel said. Reporting by Chiara Elisei and Karin Strochecker; Editing by Dhara RanasingheOur Standards: The Thomson Reuters Trust Principles.

[1/2] Logos of Swiss banks UBS and Credit Suisse are seen in Zurich, Switzerland March 19, 2023. UBS will buy rival Swiss bank Credit Suisse for 3 billion Swiss francs ($3.23 billion) and agreed to assume up to $5.4 billion in losses as it winds down the smaller peer's investment bank after a shotgun merger engineered by Swiss authorities. The U.S., UK and Swiss central banks are all scheduled to meet in the week ahead. Even after Sunday's news on Credit Suisse, optimism from analysts was laced with caution and some scepticism. Others drew attention to the losses likely to be suffered by Credit Suisse junior bondholders.

☆ Derivatives that track bonds at the heart of Credit Suisse rescue slide
▼ + stars: | 2023-03-20 | by ( ) www.reuters.com time to read: +1 min

LONDON, March 20 (Reuters) - Derivatives that track the value of key bank debt fell sharply on Monday, after UBS (UBSG.S) agreed to rescue rival Credit Suisse (CSGN.S), forcing a massive writedown of the latter's additional tier-one debt as part of the deal. Invesco's AT1 Capital Bond exchange-traded fund (INAT1.L), which tracks the value of AT1 debt, dropped 14% in early trading, while WisdomnTree's AT1 CoCo bond ETF was indicated 3% lower. Additional tier-one bonds, known as AT1s, are a type of contingent convertible debt that make up part of the capital buffers that regulators require banks to hold to protect themselves in times of market turmoil. If a bank's capital levels fall below a set threshold, AT1s can either be converted into equity or are written off, as they were in the case of Credit Suisse, which had to write off around $16 billion worth. Reporting by Amanda Cooper; Editing by Dhara RanasingheOur Standards: The Thomson Reuters Trust Principles.

☆ UBS mulls sweeteners to keep Credit Suisse wealth bankers - source
▼ + stars: | 2023-03-20 | by ( Stefania Spezzati | ) www.reuters.com time to read: +1 min

LONDON, March 20 (Reuters) - UBS Group AG told Credit Suisse wealth bankers it's weighing financial sweeteners for them to stay as it seeks to reassure key staff following the takeover, a person with knowledge of the matter told Reuters on Monday. In a town hall for Credit Suisse's employees in wealth management in Zurich, Iqbal Khan, UBS's president for global wealth management and Francesco de Ferrari, Credit Suisse's CEO for wealth management, reassured staff on Monday that the two banks will all be acting as a "big family," the person said. Before the deal, Credit Suisse had embarked on a plan to slash 9,000 jobs. That number can grow to 10,000, Reuters has reported as UBS acquires Credit Suisse. UBS said in a presentation that the acquisition will scale up the bank's global wealth and asset management franchise with more than $3.4 trillion in invested assets on a combined basis, according to a press release on Sunday.

☆ Explainer: Why markets are in uproar over a risky bank bond known as AT1
▼ + stars: | 2023-03-20 | by ( ) www.reuters.com time to read: +4 min

Here are some of the implications of the Credit Suisse AT1 bond write-down. WHAT IS AN AT1 BOND? Credit Suisse AT1 holders, therefore, are the only ones not to receive any kind of compensation. It is not the first time that the treatment of AT1 bonds in a bank overhaul has caused controversy. The decision to write down Credit Suisse AT1 bonds to zero is viewed as negative for the AT1 bond market globally.

☆ Market stress indicators flash warnings as banking worries continue
▼ + stars: | 2023-03-20 | by ( ) www.reuters.com time to read: +3 min

March 20 (Reuters) - Fears of a global banking crisis are continuing to swirl, with investors keeping a close eye on a dashboard of indicators that show how stress is rippling through markets and the banking system. Many of these are continuing to flash warnings, though they have not surpassed levels seen during the COVID-19-fueled market turbulence of 2020. But the spread, measuring the gap between the euro zone three-month forward rate agreement and the overnight index swap rate, is still relatively elevated at around -1 basis points in a sign of lingering concern about financial market stress. Cost of insuring European junk bondsThe cost of insuring exposure to European junk bonds rose to the highest since mid-November on Monday at over 516 basis points. This has risen over 130 basis points since March 7 as riskier assets have borne the brunt of bank turmoil on both sides of the Atlantic.

The fallout from the crisis of confidence in Credit Suisse Group AG (CSGN.S) and the failure of two U.S. banks could continue to ripple through the financial system next week, the two executives separately told Reuters on Sunday. The two banks have held their own internal deliberations on how soon the European Central Bank should weigh in to highlight banks' resilience, specifically their capital and liquidity positions, the people said. The executives said that their banks and the sector are well capitalized and liquidity is strong, but they fear that the crisis of confidence will sweep up more lenders. But it stressed it was monitoring market tensions and would respond as necessary to preserve price stability and financial stability in the currency bloc. As one of 30 global systemically important banks, Credit Suisse's problems could ripple throughout the entire financial system, industry executives have said.

[1/2] Logos of Swiss banks UBS and Credit Suisse are seen in Zurich, Switzerland March 19, 2023. UBS will buy rival Swiss bank Credit Suisse for 3 billion Swiss francs ($3.23 billion) and agreed to assume up to $5.4 billion in losses as it winds down the smaller peer's investment bank after a shotgun merger engineered by Swiss authorities. The failure of two U.S. banks and a rout in Credit Suisse shares have sent shock waves through markets over the past week, reviving memories of the 2008 financial crisis. The U.S., UK and Swiss central banks are all scheduled to meet in the week ahead. Others drew attention to the losses likely to be suffered by Credit Suisse junior bondholders.

Credit Suisse saw more than $200 million net outflows from its U.S. and European managed funds after March 13, Morningstar Direct said on Friday. DBRS Morningstar on Thursday became the first global rating agency to cut the bank's credit score, with a downgrade to "BBB", which still qualifies Credit Suisse as investment grade. Credit Suisse shares are down about 26% this week and poised for their biggest week drop since October 2008 and the global financial crisis. U.S. shareholders of Credit Suisse sued the bank on Thursday, claiming it defrauded them by concealing problems with its finances. Credit Suisse declined to comment on the lawsuit.

☆ Credit Suisse shares fall again, sentiment remains fragile
▼ + stars: | 2023-03-17 | by ( ) www.reuters.com time to read: +3 min

"While markets are relieved that the Swiss central bank stepped in, sentiment is bound to remain very fragile, particularly as investors will likely worry about the eventual economic impact of aggressive monetary policy tightening by the European Central Bank (ECB)," she added. DBRS Morningstar on Thursday became the first global rating agency to cut the bank's credit score, with a downgrade to "BBB", which still qualifies Credit Suisse as investment grade. Credit Suisse shares are down about 22% this week and poised for their biggest week drop since March 2020 when the COVID-19 crisis wreaked turmoil across world markets. U.S. shareholders of Credit Suisse sued the bank on Thursday, claiming it defrauded them by concealing problems with its finances. Credit Suisse declined to comment on the lawsuit.

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