5 Things to Know Before Markets Open

News of the day for March 20, 2023

Credit Suisse

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UBS buys Credit Suisse, the Federal Reserve announces a plan to boost worldwide liquidity, and a credit rating cut adds to the woes of First Republic Bank. Here’s what investors need to know today.

1. UBS Buys Credit Suisse for $3.2 Billion

UBS agreed to purchase troubled bank Credit Suisse for more than $3.2 billion, as regulators pushed for the merger of the two Swiss banks to help stabilize the global banking system. UBS will take on as much as $5.4 billion in losses in the deal, though the Swiss government promised up to $9 billion to help shore up the deal, and the Swiss National Bank agreed to provide up to $100 million in liquidity.

2. Federal Reserve and Other Central Banks Move to Boost Liquidity

The U.S. Federal Reserve joined several other central banks to announce coordinated action to provide more liquidity to worldwide financial institutions through U.S. dollar swap line arrangements. The Bank of Canada, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank also joined the initiative.

3. First Republic's Credit Rating Cut, Again

First Republic Bank's credit rating was cut again, sending the troubled bank’s stock price 20% lower in pre-market trading. Yesterday, rating agency S&P Global downgraded the bank’s rating to B+, just days after it dropped the rating to BB+ from A- as the banking crisis accelerated.

4. FDIC Sells Signature Bank to Arm of New York Community Bank

Following the collapse of Signature Bank last week, the Federal Deposit Insurance Corp. (FDIC) sold most of Signature Bank’s deposits to Flagstar Bank. The subsidiary of New York Community Bank purchased nearly $38.4 billion in assets from the failed Signature Bank, which will operate its 40 branches as Flagstar Bank beginning on Monday.

5. Markets Price in Fed Rate Hike of 25 Basis Points

On Wednesday, the Federal Reserve will announce whether it will hike interest rates and by how much, with markets currently pricing in a close to 60% chance of the Fed moving rates up by 25 basis points, according to fed funds futures data collected by CME Group.

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  1. CNN. “UBS is buying Credit Suisse in bid to halt banking crisis.”

  2. Reuters. “Fed, other central banks set joint liquidity operation.”

  3. CNBC. “First Republic shares slide 18% Monday after a credit rating downgrade.”

  4. CNN. “FDIC sells most of failed Signature Bank to Flagstar.”

  5. CNBC. “Fed poised to approve quarter-point rate hike this week, despite market turmoil.”

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