In scenes reminiscent of the start of the COVID-19 pandemic three years ago, contagion fears in global financial markets spread Monday even as central banks — including Canada’s — moved to stop a fiscal virus that threatens to undermine world monetary policy..That’s because Switzerland isolated its two largest and oldest lending institutions and US authorities put two more of its own on life support. A report in the New York Post said another dozen US institutions could be forced to close or offered life lines in the coming days. The difference this time is that instead of the ‘Wuhan virus’ this could rightly be called a ‘Californication’ syndrome..It comes as Credit Suisse — one of the world’s oldest and largest financial houses with a 162-year pedigree — shed another 60% of its value as global investors flocked for the exits on Monday. The storied bank lost about 75% of its market cap in three trading days. .Swiss authorities attempted to contain the spread by forcing a $3-billion merger with flagship UBS — it only other global bank — including the assumption of another $8 billion in liabilities. To put it into perspective, Credit Suisse was worth about $90 billion a week ago, with about a half a trillion in assets. .It came after US authorities seized the assets of Santa Clara-based Silicon Valley Bank (SBV) — a boutique institution that essentially financed the mansions of San Francisco tech-billionaires including, but not limited to the likes of Elon Musk and Mark Zuckerberg — and New York-based Signature Bank a week ago, prompting Canadian authorities to do the same in liquidating SBV’s Canadian holdings. .That wasn’t the end of it. On Monday US authorities pumped another $30 billion into a third, the failing New York-based First Republic. It wasn’t enough to stop the latter’s shares from plummeting another 50% on the NYSE, however, triggering a full scale run for the exits in banking stocks around the globe — with the exception of Canada’s which were up about .31% today..Despite reassurances on both sides of the border — especially in Canada where authorities presume they're immune to the fiscal virus — the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, Swiss National Bank today announced “a coordinated action to enhance provision of liquidity via standing US dollar liquidity swap line arrangements.”.In a joint communique, the banks said the infusion acts as “an important liquidity backstop to ease strains in global funding markets” that could otherwise constrain the supply of credit to households and businesses.”.Whew. Praise the Lord and pass the collection plate..The good news, or not — if you live in Alberta — is that it dragged oil prices down, again. What Credit Suisse lacks in depositors it more than makes up for in financing commodity hedge fund traders who speculate on futures markets who are apparently feeling short pressure cash calls to sell. Benchmark West Texas Intermediate (WTI) fell as far as $64.89 per barrel in New York Monday, down from about $80 on March 6 — although they rose slightly in aftermarket trading to $67.64..But the bottom line? Every dollar up or down is worth about $220 million to Alberta’s Treasury, which is banking on $79 to break even and post a modest surplus in 2023.
In scenes reminiscent of the start of the COVID-19 pandemic three years ago, contagion fears in global financial markets spread Monday even as central banks — including Canada’s — moved to stop a fiscal virus that threatens to undermine world monetary policy..That’s because Switzerland isolated its two largest and oldest lending institutions and US authorities put two more of its own on life support. A report in the New York Post said another dozen US institutions could be forced to close or offered life lines in the coming days. The difference this time is that instead of the ‘Wuhan virus’ this could rightly be called a ‘Californication’ syndrome..It comes as Credit Suisse — one of the world’s oldest and largest financial houses with a 162-year pedigree — shed another 60% of its value as global investors flocked for the exits on Monday. The storied bank lost about 75% of its market cap in three trading days. .Swiss authorities attempted to contain the spread by forcing a $3-billion merger with flagship UBS — it only other global bank — including the assumption of another $8 billion in liabilities. To put it into perspective, Credit Suisse was worth about $90 billion a week ago, with about a half a trillion in assets. .It came after US authorities seized the assets of Santa Clara-based Silicon Valley Bank (SBV) — a boutique institution that essentially financed the mansions of San Francisco tech-billionaires including, but not limited to the likes of Elon Musk and Mark Zuckerberg — and New York-based Signature Bank a week ago, prompting Canadian authorities to do the same in liquidating SBV’s Canadian holdings. .That wasn’t the end of it. On Monday US authorities pumped another $30 billion into a third, the failing New York-based First Republic. It wasn’t enough to stop the latter’s shares from plummeting another 50% on the NYSE, however, triggering a full scale run for the exits in banking stocks around the globe — with the exception of Canada’s which were up about .31% today..Despite reassurances on both sides of the border — especially in Canada where authorities presume they're immune to the fiscal virus — the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, Swiss National Bank today announced “a coordinated action to enhance provision of liquidity via standing US dollar liquidity swap line arrangements.”.In a joint communique, the banks said the infusion acts as “an important liquidity backstop to ease strains in global funding markets” that could otherwise constrain the supply of credit to households and businesses.”.Whew. Praise the Lord and pass the collection plate..The good news, or not — if you live in Alberta — is that it dragged oil prices down, again. What Credit Suisse lacks in depositors it more than makes up for in financing commodity hedge fund traders who speculate on futures markets who are apparently feeling short pressure cash calls to sell. Benchmark West Texas Intermediate (WTI) fell as far as $64.89 per barrel in New York Monday, down from about $80 on March 6 — although they rose slightly in aftermarket trading to $67.64..But the bottom line? Every dollar up or down is worth about $220 million to Alberta’s Treasury, which is banking on $79 to break even and post a modest surplus in 2023.
