Start the week by looking at the global economic backdrop. The following March 20 developments shaped markets and policy expectations around the world.
Credit Suisse and UBS
UBS agreed to acquire Credit Suisse in a deal valued at 3.3 billion dollars. The arrangement includes comprehensive guarantees and liquidity safeguards intended to stabilize markets and support the combined entity. The objective is to lift the value of invested assets and equity to roughly 5 trillion dollars.
Markets fear UBS’s acquisition of Credit Suisse
In internal discussions, UBS chief executive Ralph Hamers advised employees to avoid discussing business matters with colleagues and reminded staff that Credit Suisse remains a competitor. Credit Suisse, for its part, signaled that promised bonuses and salary increases would proceed, with business as usual to continue. An internal memo indicated payroll plans would not be disrupted and bonuses were scheduled for March 24.
bond loss
Investors holding Credit Suisse’s riskiest 17 billion dollars in bonds face losses that could stall parts of the global banking finance market. While the UBS takeover could save about 3.3 billion dollars in value for Credit Suisse equity investors, some bondholders argue that equity protections should not drive the entire decision. One fixed income portfolio manager noted that such losses appear inconsistent with a rational ordering of interests. This sentiment came from Patrick Kauffman of Aquila Asset Management, a holder of similar bonds.
Fed Fallout
Analysts tracking central banks point to reasons the Fed might pause rate hikes. Ongoing concerns about the banking sector influence all markets, and while a 0.25 percentage point rise remains a possibility, the Fed cooperates with five other major central banks to shore up liquidity. The involvement of analysts like Julia Coronado, president of MacroPolicy Perspectives and a former Fed economist, in this global coordination suggests that a careful pause could offer a favorable risk balance for investors.
reduces attention
As trading began in the United States, major indices showed limited movement. The Bloomberg Dollar Spot Index traded near daily lows, lifting the Japanese yen and the British pound. Government bonds in the United Kingdom and Germany firmed, while gold retraced earlier gains and oil prices declined. Bitcoin continued its upward run for a fifth straight day.
Also today…
In government debt action, the United States planned to issue 57 billion dollars in 13-week bills and 48 billion dollars in 26-week bills. Among the day’s notable results were several household product shipments and retail receipts highlighting consumer demand and inventory activity across North America.