Shotgun Wedding

In this buzz: Again Credit Suisse & First Republic (FRC)and what is next for the Fed; and more …

Arranged Marriage:
In what’s been described as an arranged marriage, the Swiss government “encouraged” (read forced) UBS to buy its domestic rival Credit Suisse (CS) for $3.25 billion on Sunday. Despite statements from the Swiss and central banks about this being a move towards stability, the deal didn’t assuage the global markets to the degree hoped as concerns about system risks persist.

Credit Suisse…
… has been troubled by losses and scandals for years though it’s recent nosedive in share price coincided with the collapse of SVS and Signature Bank in the U.S. CS’ troubles deepened last week when its largest investor, the Saudi National Bank said it couldn’t provide any more assistance.

❗Even a $54 billion loan from the Swiss National Bank wasn’t enough to calm investors so over the weekend an “emergency rescue” by UBS was engineered.

Back at home,
… ✳ First Republic bank shares drop another 18% on the pre-open after S&P cut its credit rating to B+ from BB+ on Sunday after dropping it to junk status just last week. First Republic bank remains on CreditWatch Negative according to S&P as investor remained concerns about banks with large uninsured deposit bases.

Wait, we’re not done.
… There’s a Fed meeting this week too. It seems like just a couple of weeks ago (it was) that the market was pricing in another 50 basis point hike in the Fed Funds rate but after the collapse of SVB and Signature Bank, some belief that the Fed will either raise rates a mere 25 bps or perhaps even pause its rate hikes in the wake of recent events. On Meet the Press on Sunday, host Chuck Todd asked Sen. Elizabeth Warren the question we’re all thinking. ❓Is it worse for Jer Powell to hike rates or will it signal panic if he pauses? (I’m paraphrasing). It’s a great question.

Stay tuned, we’ll find out soon enough.