• UBS (UBSN SW) is to acquire Credit Suisse (CSGN SW) for a total consideration of CHF 3bln; Credit Suisse’s additional tier 1 capital in the aggregate nominal amount of around CHF 16bln will be written off.
• Fed, BoE, BoC, BoJ, ECB and SNB agreed on coordinated action to enhance the provision of liquidity via the standing US dollar liquidity swap lines with daily 7-day maturity operations.
• European bourses began under marked pressure, but have since lifted into modestly positive territory though Banking names continue to lag.
• DXY has struggled to benefit from the subdued start, with JPY outperforming and CHF lagging.
• In Fixed, core benchmarks are benefitting from haven demand though as equity sentiment improves benchmarks are off best; German 10yr below 2.0% at worst.
• Commodities are lower intraday given the broader risk tone and are yet to 'recover' in-line with the equity move.
• Looking ahead, highlights include Russian President Putin & Chinese President Xi Meeting; French Gov't no-confidence vote.

BANKS

US

• US President Biden said he is confident the bank crisis has calmed down and thinks US bank pressures have eased. It was also separately reported that the Biden administration is under increasing pressure to expand the deposit guarantee to boost confidence in the financial system, according to FT.
• Fed, BoE, BoC, BoJ, ECB and SNB agreed on coordinated action to enhance the provision of liquidity via the standing US dollar liquidity swap lines with daily 7-day maturity operations. Fed noted it will improve swap lines' effectiveness in providing USD funding and central banks currently offering USD dollar operations agreed to increase the frequency of 7-day maturity operations from weekly to daily from Monday through to at least the end of April, according to Reuters.
• Fed and FDIC officials are to testify before the House panel on March 29th to discuss recent bank failures. It was also reported that the FDIC was considering a backstop on bank auctions for SVB Financial (SIVB) and Signature Bank (SBNK), while midsized US banks asked the FDIC to insure all deposits for two years.
• FDIC announced the subsidiary of New York Community Bancorp (NYCB) is to assume deposits of Signature Bridge Bank from the FDIC and 40 former Signature Bank (SBNY) branches will operate under New York Community Bank's Flagstar Bank from today, while Flagstar's bid did not include approximately USD 4bln of deposits related to the former Signature Bank's digital banking business, according to Reuters.
• Warren Buffet held discussions with senior Biden administration officials regarding the banking crisis, according to a source cited by Reuters. FBN’s Gasparino noted rumours that Warren Buffet is meeting with mid-sized banks for a deal to quell the crisis.
• US Senator Warren called for an investigation into the failures of SVB and Signature Bank, while she responded ‘no’ when asked if she has faith in San Francisco Fed President Daly in the wake of the SVB collapse, according to Reuters and WSJ. WSJ also separately reported that the Fed raised concerns about SVB's risk management in 2019.
• Appaloosa’s David Tepper reportedly purchased SVB Financial bonds between SVB’s collapse and its bankruptcy filing, according to FT.

CREDIT SUISSE

• UBS (UBSN SW) is to acquire Credit Suisse (CSGN SW) for a total consideration of CHF 3bln, according to Reuters.
• UBS (UBSN SW) said the company will suspend share buybacks and that they did not initiate the discussions but believe the transaction is financially attractive to UBS shareholders and are planning to de-risk and downsize Credit Suisse’s investment banking operations. UBS also noted its strategy is unchanged in US and APAC and said that Credit Suisse is quite complementary to the wealth business in Southeast Asia. Furthermore, Colm Kelleher will be Chairman and Ralph Hamers will be Group CEO of the combined entity, while the transaction is not subject to shareholder approval and there is a material adverse change clause on the Credit Suisse deal.
• Credit Suisse (CGSN SW) shareholders will receive 1 share in UBS (UBSN SW) for 22.48 shares in Credit Suisse which reflects a merger consideration of CHF 3bln and that FINMA determined that Credit Suisse’s additional tier 1 capital in the aggregate nominal amount of around CHF 16bln will be written off. Credit Suisse also told staff in a memo that the details of the transaction are being worked through and no disruption to client services is expected, while it told staff there will be no changes to payroll arrangements and bonuses will still be paid on March 24th.
• SNB said it is providing substantial liquidity assistance to support the UBS takeover of Credit Suisse and the takeover was made possible with the support of the Swiss federal government, FINMA and SNB, while it added that both banks have unrestricted access to the SNB’s existing facilities. There were also comments from the Swiss Finance Minister that this is a commercial solution and not a bailout, while she noted the cost of bankruptcy to the Swiss economy would have been huge.
• ECB said it welcomes the swift actions and decisions taken by Swiss authorities and noted that the Euro area banking sector is resilient with strong capital and liquidity positions. ECB’s Lagarde also stated that the ECB’s policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed.
• BoE said it welcomes the comprehensive actions by the Swiss authorities to merge UBS and Credit Suisse, while it has been engaging with international counterparts throughout preparations for the announcement. Furthermore, it stated that the UK banking system remains safe and sound and is well-capitalised and funded.
• Fed Chairman Powell and US Treasury Secretary Yellen said they welcome the announcements by Swiss authorities to support financial stability and noted the capital and liquidity positions of the US banking system are strong and US financial system resilience is strong. Furthermore, they have been in close contact with international counterparts to support their implementation.
• At least two major banks in Europe are examining scenarios of contagion potentially spreading across Europe’s banking sector and looking to the Fed and ECB to step in with stronger signals of support, according to Reuters citing executives with knowledge of the deliberations.
• Swiss Sight Deposits (CHF): Domestic Banks 499.9bln (prev. 496.5bln); Total 515.1bln (prev. 510.7bln).

ECB

• ECB, EBA, and SRB say Additional Tier 1 (AT1) is and will remain an important component of European banks' capital structure; common equity instruments are the first to absorb losses and only after their full use would AT1 be required to be written down
• ECB’s Holzmann said he fears the ECB rate will reach above 4% and is expecting a few more rate hikes, while he added that the extent of further hikes would be data dependent and sees no global financial crisis like in 2008, according to Reuters.
• ECB’s Rehn said the ECB is to take the needed action to ensure price and financial stability, while he added that inflation is not easing enough.
• ECB's Villeroy says France should avoid recession and domestic banks are strong. Regulation of French and European banks is better than in the US. French banks have strong liquidity and capital. Click here for the latest Bank of France forecasts.
• ECB's Kazaks says the ECB is not done on rate hikes if the baseline holds up, via Bloomberg.

EUROPEAN TRADE

EQUITIES

• European bourses are mixed/flat, as marked banking-led pressure has eased throughout the morning following the initial reaction to the UBS-Credit Suisse merger.
• On this, Credit Suisse and UBS opened lower by over 60% and 8% respectively, but have since eased off lows with the broader SX7P index now ~2% lower vs downside of over 5% at worst.
• On the merger, attention is on Credit Suisse's AT1 bonds being written off; a detail which pressured such bonds in APAC trade, with HSBC for instance a notable initial laggard on this. Since, we have seen European regulators reiterate that CET instruments are the first to absorb losses, with AT1 only required after their full use.
• Stateside, futures are in similar proximity to the unchanged mark given the above as participants await updates around First Republic and look ahead to the FOMC.
• Click here for more detail.

FX

• The DXY has struggled to benefit from the subdued start to the session, with the index near the mid-point of 103.68-103.96 parameters for much of the morning.
• Given the tone, the JPY is the standout outperformer with USD/JPY down to 130.55 vs 132.64 peak; though, given the relative pickup in equity performance USD/JPY is now holding above 131.00.
• Despite the subdued risk tone, CHF is the underperformer as the market's focus remains on Credit Suisse/UBS; USD/CHF above 0.93 and EUR/CHF above 0.99.
• Given their high-beta status, the Antipodeans are also faring poorly with RBA minutes and Kiwi trade data scheduled ahead.
• Elsewhere, peers are comparably more contained with EUR/USD holding above 1.0650 and Cable near 1.22.
• PBoC set USD/CNY mid-point at 6.8694 vs exp. 6.8701 (prev. 6.9052)
• Click here for more detail.

FIXED INCOME

• EGBs and USTs are benefitting from marked haven demand, with Bunds over 140.00 and USTs nearing 117.00 at best, though the benchmarks have eased from highs as equity sentiment improves.
• Specifically, Bunds soared to a 140.30 peak vs 137.10 low, but have since pulled back to just below 140.00 as the associated 10yr yield slipped to a 1.92% intraday low.
• Stateside, USTs are similar in both direction and magnitude with yields lower across the curve and action more pronounced in the short-end currently; as it stands, market pricing via Reuters is leaning towards the Fed leaving rates unchanged on Wednesday, with around a 40% chance of a 25bp hike implied.
• Click here for more detail.

COMMODITIES

• WTI and Brent are lower intraday given the broader risk tone and while they are off lows, are yet to stage a 'recovery' akin to that seen in equities; currently, the benchmarks are lower by circa. USD 2/bbl just above USD 64.12/bbl and USD 70.12/bbl respective lows.
• Spot gold surpassed USD 2000/oz, but failed to hang onto the level as the DXY makes its way back into positive territory and broader sentiment improves slightly while base metals are moving with equity sentiment and as such are turning incrementally firmer on the session.
• Iraq’s Oil Minister said his country is committed to OPEC’s agreed production rates and obliged some oil companies' operations in the south to cut production to come in line with OPEC’s agreed rates, while it was also reported that Iraq and OPEC stressed the importance to coordinate to stabilise prices, according to Reuters.
• Iran set April Iranian light crude oil price to Asia at Oman/Dubai plus USD 2.50/bbl, according to Reuters.
• India plans to extend export restrictions on diesel and gasoline beyond March 31st, according to Reuters sources.
• TotalEnergies (TTE FP) said 34% of operational staff at its refineries and depots conducted a strike on Sunday morning in protest against the government’s move to raise the retirement age by two years, according to Reuters.
• Kuwait Oil Company declares a state of emergency re. an oil spill located in west Kuwait; production unaffected.
• Click here for more detail.

NOTABLE HEADLINES

• BoE's plans to revamp bank capital rules risk a 25% reduction in lending to small businesses which threatens jobs and economic growth, according to a study by consultants Oxera cited by FT.
• PoliticsHomes' Payne reminds that DUP MPs meet today to discuss their stance on Wednesday's Windsor Framework vote, expected to announce their stance on Tuesday.
• Moody’s affirmed Greece at Ba3; Outlook revised to Positive from Stable and affirmed Luxembourg at AAA; Outlook Stable, while S&P affirmed Belgium at AA; Outlook Stable.

NOTABLE DATA

• UK Rightmove House Prices MM (Jan) 0.8% (Prev. 0.0%); YY (Jan) 3.0% (Prev. 3.9%)
• German Producer Prices YY (Feb) 15.8% vs. Exp. 14.5% (Prev. 17.8%, Rev. 17.6%); MM (Feb) -0.3% vs. Exp. -0.5% (Prev. -1.0%, Rev. -1.2%)

NOTABLE US HEADLINES

• Former US President Trump claimed that he is to be arrested on Tuesday related to hush money payments to adult film star Stormy Daniels and called for protests, while top Republicans including potential rivals for the party’s nomination rushed to his defence although there has not been any official confirmation regarding charges being brought, according to The Guardian.

GEOPOLITICS

• Russian President Putin visited Crimea on the 9th anniversary of its annexation from Ukraine and also visited Mariupol in the occupied Donetsk region of Ukraine, while he also met with the top command of Russia’s military operation in Ukraine at the Rostov-on-Don command post in southern Russia, according to Reuters.
• Russian President Putin said the visit by Chinese President Xi confirms the special character of the Russian-Chinese partnership and Russia is pinning big hopes on the visit, while he added Russia is expecting a powerful impulse to relations and that relations are at their highest ever point. Putin also said there are no limits or forbidden subjects in relations with China and he is grateful for China’s balanced line on events in Ukraine, as well as welcomes China’s willingness to play a constructive role in solving the Ukrainian crisis. Furthermore, Putin said that they are worried about dangerous actions that could undermine global nuclear security and Russia is open to a diplomatic settlement of the Ukraine crisis but rejects ultimatums, according to Reuters.
• Chinese President Xi said China has always taken an objective and impartial position on the situation in Ukraine and has made efforts to promote reconciliation and peace negotiations, according to Rossiiskaya Gazeta.
• ICC judge issued an arrest warrant for Russian President Putin over alleged war crimes related to ‘unlawful deportation’ of Ukrainian children, according to The Guardian. It was also reported that German Chancellor Scholz said ICC is an important institution that has been given a mandate through international treaties and noted that nobody is above the law which is becoming clear now, according to Reuters.
• Ukrainian President Zelensky’s Chief of Staff and several top security officials including the Defence Minister held a call with US counterparts to discuss military aid for Ukraine, according to Reuters.
• Ukrainian Infrastructure Minister said the Black Sea grain deal has been extended for 120 days which is longer than the 60-day touted by Russia, while a UN spokesman confirmed the extension of the export deal but didn’t specify the length of the renewal, according to Reuters.
• EU foreign policy chief Borrell said an agreement was reached on ways to implement an EU-backed deal on normalising ties between Serbia and Kosovo, while he added that the sides agreed to implement their respective obligations in good faith.
• Saudi Arabia’s King Salman invited Iranian President Raisi to visit Riyadh, while it was also reported that Iran’s Foreign Minister agreed to hold a meeting at the foreign minister level with Saudi Arabia and said that Iran has declared a readiness to reopen embassies. In other news, Iraq and Iran signed a deal to tighten their border security.
• South Korea said that North Korea fired a short-range ballistic missile off the east coast into the sea on Sunday which flew 800km before hitting a target and is a clear violation of the UN Security Council resolution. In relevant news, G7 foreign ministers said they regret inaction by the UN Security Council regarding North Korea’s missile tests and that the March 16th ICBM launch undermines international peace, according to Reuters.
• North Korea confirmed it conducted exercises aimed at improving tactical nuclear capability on March 18th-19th and said the US and South Korea are expanding joint military drills aimed at North Korea involving US nuclear assets and its exercises are meant to send strong warnings against US and South Korea. Furthermore, North Korean leader Kim said the country should be ready to conduct nuclear attacks at any time in a deterrence of war, according to KCNA.

CRYPTO

• Bitcoin remains bid and has extended comfortably above the USD 28k handle, though is yet to convincingly breach USD 28.5k to the upside.

APAC TRADE

• APAC stocks were on the back foot amid ongoing banking sector jitters despite the announcement that UBS will take over Credit Suisse in an emergency rescue valued at CHF 3bln which would wipe out CHF 16bln of additional tier 1 bonds.
• ASX 200 extended its retreat from a recent break beneath 7,000 with declines led by weakness in the energy, real estate, consumer and financial sectors, although gold miners were boosted after last week’s climb in the precious metal.
• Nikkei 225 was pressured amid the banking sector woes and after the BoJ’s Summary of Opinions provided little in the way of new information whereby it reiterated that the BoJ must patiently maintain monetary easing.
• Hang Seng and Shanghai Comp. were varied with Hong Kong underperforming on broad weakness across sectors, while the mainland was kept afloat for most of the session after Friday’s surprise RRR cut by the PBoC in an effort to boost liquidity and support the economy, but opted to maintain its benchmark lending rates.

NOTABLE ASIA-PAC HEADLINES

• PBoC 1-Year Loan Prime Rate (Mar) 3.65% vs. Exp. 3.65% (Prev. 3.65%); 5-Year Loan Prime Rate (Mar) 4.30% vs. Exp. 4.30% (Prev. 4.30%)
• PBoC warned the collapse of Silicon Valley Bank shows rapid monetary policy shifts in developed economies are having a hazardous impact on financial stability, according to Bloomberg citing comments from Deputy Governor Xuan.
• PBoC adviser Cai said China needs household stimulus to boost the recovery and noted that residents' incomes have not grown well in the past few years, so the recovery in consumption is not enough to support economic growth, according to Caijing.
• Russian President Putin said he expects total trade volume with China to exceed USD 200bln this year and it is important to increase the share of trade with China conducted in national currencies, according to Reuters.
• WHO advisers urged China to release all information related to the origin of the COVID-19 pandemic after new findings were briefly shared on an international database to track pathogens, while they recommended researchers in China investigate upstream sources of animals and animal products present in the Huanan Market before January 1st 2020, according to Reuters.
• BoJ Summary of Opinions from the March meeting stated that the BoJ must patiently maintain monetary easing until the price target is achieved and the BoJ must scrutinise without any preset idea the state of market function but must maintain easy policy at present. Furthermore, it stated the BoJ must focus on the risk of losing the chance to meet the price target with a premature policy shift, rather than the risk of being too late in shifting policy and must be mindful of the risk inflation may overshoot expectations.