Markets:
- Gold up $14 to $1916
- WTI down $3.26 to $68.11
- US 10-year yields down 16 bps to 3.47%
- US 2-year yields down 30 bps to 3.91% after falling as low as 3.78%
- S&P 500 down 27 points to 3891
- JPY leads, CHF lags
It was another full-scale flight to safety today and the yen was the main beneficiary. Normally the Swiss franc would be as well but the main issue right now is that Credit Suisse is under the microscope with all kinds of rumors flying around. Regulators released a statement and there’s hope for some kind of merger into a stronger bank but the it’s a delicate situation. Shares were down more than 30% at one point but there was a strong bounce after the SNB said it would provide liquidity and the loss pared to 14%.
There’s a big rethink on the path of global interest rates ongoing right now and with the ECB coming tomorrow that’s the focus. The implied probability is now 67% for just 25 bps tomorrow rather than the 50 bps that ECB officials have repeatedly forecast. In any case, the path for eurozone rates is much lower than it was just a few days ago and that was reflected in a drop as low as 1.0517 in EUR/USD.
Global growth worries are mounting alongside the turmoil and that hit some commodities and commodity currencies more than others. WTI crude oil broke through the multi-month range bottom near $70 and then crumbled to $65.65 before bouncing $3 late. USD/CAD finished up 79 pips, which isn’t bad considering but may reflect differentials that now slot the BOC near the top of the expected curve. In addition, the questions about Canadian banks are minimal.
There are some questions and rumors about some UK banks but cable is holding up because it was already seen as closer to the rate top. In addition, there’s the perception that it will be easier for the UK government to solve banking problems than the mess of regulation in the eurozone.