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Banks in Switzerland sought the most dollars since 2008 using an emergency dollar swap facility provided by the Federal Reserve in what is likely to be a bid for easy profits.
In today's auction conducted by the Swiss National Bank, 17 institutions took up $11.09 billion. That's the most since October 2008, when the Global Financial Crisis was raging in the wake of Lehman Brothers' collapse.
This is the fourth week in a row when banks have accessed the facility. Last Wednesday 15 banks took up $6.27 billion in funds.
According to economists at Credit Suisse, Swiss banks swap the dollars into francs in order to generate a profit. The lenders can even sell the cash back to the Swiss National Bank using its reverse repo auctions, or deposit it at the institution to benefit from a positive interest rate.
"We do not believe that the increased demand for U.S. dollar liquidity by domestic banks reflects any liquidity issues in the Swiss banking system," Credit Suisse economist Maxime Botteron wrote in a report last week. ...
Oct. 27 (UPI) -- Swiss banking giant Credit Suisse said Thursday it will radically restructure the bank, cutting 9,000 jobs by the end of 2025 in an effort to cut heavy losses while addressing investor concerns.
The bank said 2,700 job cuts are already underway, but did not specify where the cuts are being made. The bank's full-time workforce will go from 52,000 to 43,000 by the end of 2025.
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The Credit Suisse statement said it will seek $4 billion in new financing, including $1.5 billion from the Saudi National Bank. Credit Suisse said it will focus on wealth management.
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Some would say "I smell bagels."I smell shenanigans
• British government bonds (gilts) suddenly plunged in value (their interest rates spiked) after the Truss government made completely incompetent energy-bailout and tax-cut announcements;
• Large numbers of pension funds were “hours from collapse” late on Sept. 27;
• Complete panic hit the $1.69 trillion so-called “liability-driven investment” (LDI) pension funds;
• “The Bank was informed by a number of LDI fund managers ... that these funds would have to begin the process of winding up the following morning”;
• A “large quantity of gilts, held as collateral by banks that had lent to these LDI funds, was likely to be sold on the market, driving a potentially self-reinforcing spiral and threatening severe disruption of core funding markets and consequent widespread financial instability”;
• “Bank of England staff worked through the night on Tuesday, Sept. 27 ... to avert this potential crisis, in close communication” with HM Treasury.
What is the incentive to save? 1% interest rate?black swan, meet red flag
In fact, the personal saving rate -- meaning personal saving as a percentage of disposable income, or the share of income left after paying taxes and spending money -- fell to 3.5% in August, according to the Bureau of Economic Analysis. It's quite a U-turn: The personal saving rate recently peaked at 26.3% in March 2021 and 33.8% in April 2020. But the drop in the personal saving rate isn't all pandemic-related: In January 2020, before the coronavirus pandemic, it was 9.1%.
more at link...
BOE pension crisis officially averted?
The Bank of England has called for urgent action to address a weak spot in the UK financial system as persistent worries about the global banking sector threaten to unleash fresh market turmoil.
The central bank said Wednesday that UK banks had enough financial resources to avoid shocks but the pensions regulator needed to move “as soon as possible” to increase the resilience of liability-driven investment funds.
These “LDI” funds, which many UK pension schemes invest in, proved particularly vulnerable when the British bond market came under enormous strain following then-Prime Minister Liz Truss’s disastrous budget six months ago. The Bank of England had to step in to avert a broader financial meltdown.
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Big bets by hedge funds against Treasury securities pose a risk to the global financial system, the Bank of England has warned.
In its latest financial stability report, published Wednesday, the U.K. central bank noted that short positions in Treasury futures have increased notably of late and are now at levels not seen since 2018.
The BoE said its “market intelligence” suggests these futures positions are not outright bets that government bond prices will fall and yields rise, but trades relative to bonds or swaps.
These so-called “basis trades” look to exploit small price differences between economically similar cash bonds and Treasury futures. To make notable returns the trades are highly leveraged and require low volatility.
The trade blew up the bond market in early 2020 when the COVID pandemic caused a surge in Treasury volatility amid a surge in demand for government debt.
But vulnerabilities remain in the system of market-based finance, said the BoE.
“For instance, over recent months, leveraged hedge funds have built up large positions in U.S. Treasury futures, which market intelligence suggests are relative to bonds or swaps. If these markets were to move sharply, deleveraging these positions could further amplify stress,” it said.
The BoE added: “These risks, and other underlying vulnerabilities in the system of MBF…remain largely unaddressed and could resurface rapidly. In particular, the sharp transition to higher interest rates and currently high volatility increases the likelihood that MBF vulnerabilities crystallise and pose risks to financial stability.”
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