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Speaker 1: This is Bloomberg Daybreak here for this Thursday, the sixteenth

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Speaker 1: of March in London. Coming up today, reaching for a lifeline,

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Speaker 1: Credit sweez taps up to fifty four billion dollars of

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Speaker 1: central bank funding. Shock and after shock. Financial stocks take

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Speaker 1: a hammering as credit sweet shares plunge. No such thing

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Speaker 1: as a sure thing. Traders slash bet on a half

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Speaker 1: point hike at today's ECB meeting. A canary in the

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Speaker 1: coal mine, two big to save and the price of

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Speaker 1: cheap money. That's how top financiers have been reacting to

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Speaker 1: the big story of the day, and leanne Gerns and

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Speaker 1: as money managers kept their eyes glued to the terminal.

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Speaker 1: The Chancellor's attention was elsewhere, will bring you details of

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Speaker 1: Jeremy Hunt's first budget. That's all straight ahead on Bloomberg

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Speaker 1: Daybreak Europe. The business views you need to start your

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Speaker 1: day in just one fifteen minute podcast on Apple, Spotify,

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Speaker 1: the Bloomberg Business app and everywhere you get your podcasts.

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Speaker 1: Good morning, I'm Stephen Carroll and I'm Caroline Hitke. Here

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Speaker 1: are the stories that we're following today. Credit Suite is

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Speaker 1: tapped Switzerland Central Bank for as much as fifty billion

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Speaker 1: francs liquidity facility as it tries to stem a crisis

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Speaker 1: of confidence that sent shockwaves across the global financial system.

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Speaker 1: The troubled lender is also making a tender offer to

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Speaker 1: buy back up to three billion dollars of dollar three

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Speaker 1: billion francs of dollar and eurodenominated debt. The announcement follows

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Speaker 1: a frantic trade accession that alarmed regulators across Europe in

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Speaker 1: the US and prompted some firms to reassess their exposure

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Speaker 1: to credit suites. Despite all of that, Saxo Banks CEO

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Speaker 1: Kim Fournez says, this isn't like two thousand and eight.

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Speaker 1: I don't think it's a Leman moment by the way.

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Speaker 1: I think that this is really bad, and of course

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Speaker 1: it can get out of control, but I don't think

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Speaker 1: that that's Sames for paying. So anyone else can just

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Speaker 1: sit and watch this. That was Saxo Banks CEO Kimfournez

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Speaker 1: speaking to Bloomberg a little bit earlier. Well, the term

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Speaker 1: or surrounding credits dates back years, but it was a

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Speaker 1: Bloomberg interview that sent it into a full blown crisis.

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Speaker 1: Speaking to our colleague, Yusef Gamal held in the chairman

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Speaker 1: of the troubled lender's largest shareholder, Saudi National Bank, was

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Speaker 1: asked if they would be injecting in any more cash.

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Speaker 1: Have a listen to the response. The answer is absolutely not,

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Speaker 1: for many reasons outside the simplest reason, which is regulatory

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Speaker 1: and statutory. We now own nine point eight percent of

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Speaker 1: the bank. If we got above ten percent, all kinds

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Speaker 1: of new rules kick in, whether it be by our

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Speaker 1: regulator or the European regulator, or this was the regulator,

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Speaker 1: and we're not inclined to get into a new regulatory regime. Well,

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Speaker 1: it was those comments by Saudi National Bank chairman Ama

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Speaker 1: Abdul Wahid al Kudai that seemed to spot that huge

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Speaker 1: sell off at the bank. Share slumped as much as

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Speaker 1: thirty one percent in Zurich trading, while credit sweets bombs

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Speaker 1: fell to levels that warned of deep financial crist this. Meanwhile,

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Speaker 1: the European central banks plans may be upended. According to

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Speaker 1: Bloomberg Economics, Christine Lagarde will probably engineer a twenty five

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Speaker 1: basis point hike today, for going earlier guidance of a

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Speaker 1: half point move. It comes as the Governing Council grapples

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Speaker 1: with the credit suites fallout. Bloomberg Maria TODAYO has the details. Now,

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Speaker 1: the European Central Bank is expected to unveil its latest

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Speaker 1: monetary policy decision against a backdrop of market volatility following

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Speaker 1: the collapse of the Silicon Valley Bank and amplified by

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Speaker 1: fears around the future of credit suites. Now, the question

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Speaker 1: going into this meaning, and this is really the core

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Speaker 1: of the issue, is will the European Central Bank stick

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Speaker 1: to its very well guided, very well calibrated fifty basis

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Speaker 1: points hike that was expected today or actually go for

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Speaker 1: a softer hike if twenty five basis points. Given the

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Speaker 1: volatility in the European banking sector in Frankfurt Maria Todo

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Speaker 1: Bloomberg Deyberg Europe Now, bond traders scramble to change how

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Speaker 1: they were pricing rate paths around the world. In the

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Speaker 1: US two year treasury yields plummeted as much as fifty

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Speaker 1: four basis points to three point seven one percent, That

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Speaker 1: is the lowest level since mid September, and German two

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Speaker 1: year yields fell forty eight basis points in a day,

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Speaker 1: the most on record. But Michael JP Mukin's CIO thinks

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Speaker 1: that the FED and the ECB now need to change

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Speaker 1: their plans. I think with credit to us on the table,

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Speaker 1: they will pass. I think they should passe. I think

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Speaker 1: hiking rates, either the ECB hiking rates this week or

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Speaker 1: the FED hiking rates next week, has the potential to

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Speaker 1: be the greatest gaff since the ECB hike rates in

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Speaker 1: June two thousand and eight. So that was JP Morgan,

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Speaker 1: CIO Bob Michael there well. Rates have been moving so

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Speaker 1: quickly that trading was briefly halted in a key corner

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Speaker 1: of the US interest rate market yesterday as futures contracts

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Speaker 1: sowed through circuit breakers. Were understands that San Francisco based

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Speaker 1: First Republic Bank is exploring strategic options, including a sale.

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Speaker 1: The lender was cut to junk by SNP and Fitch yesterday.

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Speaker 1: Depositors may have no choice but to return to Silicon

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Speaker 1: Valley bank. Startups with loans and the collapse lender were

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Speaker 1: often required to keep all or a portion of their

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Speaker 1: cash with it, and if those governments are broken, they

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Speaker 1: could be considered in default. Now to the UK, the

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Speaker 1: Chancellor of the Exchequer, Jeremy Hunt, says that the British

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Speaker 1: economy will avoid a recession this year. In his budget speech,

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Speaker 1: Hunt set out plans to boost growth and productivity, but

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Speaker 1: critics say that scrapping the lifetime allowance on pension savings

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Speaker 1: at a cost of one point one billion pounds means

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Speaker 1: giving rich people seventy five thousand pounds per person in

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Speaker 1: annual tax breaks. Here is Jeremy Hunt speaking to the

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Speaker 1: Commons yesterday Today, the Office for Budget Responsibility forecasts that

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Speaker 1: because of changing international factors and the measures I take,

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Speaker 1: the UK will not now enter a technical recession this year.

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Speaker 1: They forecast we will meet the Prime Minister's priorities to

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Speaker 1: harve inflation, reduce debt and get the economy growing. We

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Speaker 1: are following the plan and the plan is working. The

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Speaker 1: chance of Jeremy Hunt there, despite his optimistic words and

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Speaker 1: fiscal loosening, it came as the UK remains the only

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Speaker 1: country in the G seven not to recover its pre

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Speaker 1: pandemic level of GDP. Right, those are a few of

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Speaker 1: our top stories this morning. You and I were here

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Speaker 1: actually covering the budget yesterday live on Bloomberg Radio. Budget

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Speaker 1: twenty twenty three, as the credit sweek crisis was ramping

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Speaker 1: up and starting to terminate markets. But I sort of

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Speaker 1: want to kind of wrap up our ideas around the

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Speaker 1: budget in terms of the money to shield households form

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Speaker 1: energy prices and childcare costs. George Buckley, who's the chief

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Speaker 1: UK economist at Nomura, he talks about the stimulus as

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Speaker 1: not being peanuts. I thought that was quite interesting. We

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Speaker 1: went into the UK budget thinking that the childs wouldn't

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Speaker 1: have that much to give away, but actually he did

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Speaker 1: give quite a bit for childcare, for energy bills, but

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Speaker 1: also for pensions, and that's the bit that has been

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Speaker 1: most controversial. Yeah, I mean, is this a giveaway to

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Speaker 1: a key Tory constituency of the question being asked by

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Speaker 1: some critics of that move on pensions to scrap the

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Speaker 1: lifetime allowance entirely, essentially allowing people to be able to

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Speaker 1: put much more into their pensions over a lifetime without

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Speaker 1: being penalized for tax purposes. The question being asked by

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Speaker 1: some market watchers as what does this mean for the

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Speaker 1: Bank of England? Is that stimulus going to make their

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Speaker 1: calculations more difficult when it comes to interest rate hikes

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Speaker 1: as well? At a time when we have this global

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Speaker 1: backdrop of so much turmoil in the banking system as well,

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Speaker 1: of course credit suites being our main focus today, but

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Speaker 1: at interesting to pick up on some of those threads

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Speaker 1: from the budget as well, to get an idea of

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Speaker 1: how those stories are playing out as well. The t

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Speaker 1: Live blog on the terminal gives you all the latest

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Speaker 1: on what's happening at Credit Spees two. Yeah, so let's

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Speaker 1: get the latest developments. Then. Tim craighead, Senior European Equity

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Speaker 1: Stratus at Bloomberg Intelligence, is joining us now for more.

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Speaker 1: So look, I mean, what's happened at Credit Speee also

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Speaker 1: making central banks rethink, but start off just by explaining

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Speaker 1: to us the difficulties that Credit SWEE have been known

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Speaker 1: for quite a long time. So what is it about

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Speaker 1: the comments from the top shareholder yesterday speaking to Bloomberg

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Speaker 1: that actually triggered the crisis? Tim? If I knew that,

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Speaker 1: for sure, I'd probably be on a beach somewhere. But

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Speaker 1: in reality, I think it's just simply a symptom of

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Speaker 1: the time that we're in that we've got a very

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Speaker 1: fragile sentiment in the marketplace. I mean, if you take

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Speaker 1: what he said, there's no huge surprise in atum, but

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Speaker 1: credit suite clearly has had issues. Um there's been ongoing concern.

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Speaker 1: Look at where it's trading on a price to book

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Speaker 1: value basis, it's point two times. That's that's where Deutsche

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Speaker 1: Bank bottomed, It's where Morgan Stanley bottomed back in the

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Speaker 1: financial crisis. You know, this is you know, exceedingly low.

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Speaker 1: And you know, if you if you look at what's

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Speaker 1: going on with its credit um UH exposure, you know,

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Speaker 1: the cdss have exploded, which in part might reflect concern

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Speaker 1: with credit suites, even though their capital ratios actually remain

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Speaker 1: solid um. But it seems that this is the bank

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Speaker 1: and this is the credit that hedge that Hedge funds

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Speaker 1: or other concerned investors are using as the as the

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Speaker 1: vehicle to um UH sort of voice concerns about, you know,

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Speaker 1: the overall banking situation. We continue you to think that

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Speaker 1: we will get through this. Is this more like an

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Speaker 1: a long term credit situation or the SNL situation back

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Speaker 1: in the nineteen eighties in the US, or is it

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Speaker 1: a financial global financial crisis. We don't think it's the latter.

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Speaker 1: We think it's more more specific than this. And not

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Speaker 1: to keep yeah, not to keep going, but the issue

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Speaker 1: with credit suites that I think is important to note

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Speaker 1: is that, as you well said, this has been going

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Speaker 1: on for some time. They've restructured their business. But more importantly,

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Speaker 1: banks with their relationships with credit suites have restructured. There's

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Speaker 1: not the counterparty risk that would have happened a couple

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Speaker 1: of years ago had this come out of the blue.

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Speaker 1: Will then, given that context, will this move from the

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Speaker 1: Swiss Nostra Bank be enough to calm fears over Credit

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Speaker 1: Suite's future. I mean, you mentioned that the CT one

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Speaker 1: ratio fourteen point one percent is miles apart from what

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Speaker 1: we were looking us in two thousand and eight. Yeah,

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Speaker 1: it is, and it's it's it's actually miles apart from

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Speaker 1: where even credit Squeezes was only several quarters ago. You know,

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Speaker 1: it's it's it's better. Um. I think we day by day,

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Speaker 1: hour by hour, we're likely to continue to see volatility.

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Speaker 1: It's it's a sloppy market right now. Is we have

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Speaker 1: waxing and waning sentiment revolving around central bank policy, whether

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Speaker 1: it's the ECB or the FED or the BOEUM, and

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Speaker 1: that jerks around valuations UM. And so from that perspective,

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Speaker 1: it wouldn't surprise me to see European markets as futures

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Speaker 1: are now indicating, you know, bounce back to the degree

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Speaker 1: that we've seen regulators, national banks, central banks UH come

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Speaker 1: out with supportive comments. UH. And that's quite critical. What

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Speaker 1: we can't project is what do individual or firms with

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Speaker 1: deposits with credit suites decide to do. You know, with

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Speaker 1: SVB there there wasn't really a problem until there was,

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Speaker 1: and you know, deposits, you know, can be somewhat fragile.

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Speaker 1: Now that was an extreme situation because the nature of

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Speaker 1: their deposit base, which was so far out of the

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Speaker 1: park relative to any other bank. And I certainly wouldn't

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Speaker 1: suggest that credit squeeze is anywhere like that, but you

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Speaker 1: know that's going to be the newsflow that we're going

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Speaker 1: to have to suffer with for the next several days

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Speaker 1: as this settles. Yes, yeah, I want to bring in

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Speaker 1: at this point, of course, the statement of the Credit

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Speaker 1: sweet CEO Kerner, because when we had this announcement of

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Speaker 1: the helpful the Swiss National Bank the FIST four billion dollars,

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Speaker 1: there was a statement and he said this, the measures

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Speaker 1: demonstrate decisive action to strength and credit suite as we

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Speaker 1: continue our strategic transformation. My team and are resolved to

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Speaker 1: move forward to rapidly deliver a simpler and more focused

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Speaker 1: bank built around client needs. So that is the view

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Speaker 1: of all Vick Kerner very much sticking to the view

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Speaker 1: that it is about the transformation of the bank. But

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Speaker 1: as you say, Tim, what could happen today? What should

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Speaker 1: be watching out for now today as Europe prepares to open.

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Speaker 1: I mean you got to bear in mind he had

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Speaker 1: three US banks in the last week to ten days

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Speaker 1: that have collapsed. I know that that we're not saying

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Speaker 1: that that is the big concern around Credit Sweez, But

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Speaker 1: what should be watching today? Yeah, I mean, look, I

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Speaker 1: think I do think Credit Sqeeze is a totally different situation.

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Speaker 1: You know. SVB, you know, clearly had a really strange

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Speaker 1: deposit base with nothing that was stable and a lending

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Speaker 1: book that was very different and focused on a fragile

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Speaker 1: group that is constantly drawing down funds. So there was

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Speaker 1: a natural mismatch. And the same thing could be said

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Speaker 1: about Signature in ways with its crypto exposure. You know,

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Speaker 1: this situation with Credit Suites. They do have a very

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Speaker 1: interesting plan from the standpoint of pulling out the investment

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Speaker 1: bank and refocusing on the core wealth business and cutting costs,

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Speaker 1: and yeah, as he's said, it takes time to execute

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Speaker 1: and there's nothing he can really do about day by

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Speaker 1: day's sentiment. I do think that the announcements from the

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Speaker 1: standpoint of government central banks in terms of support and

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Speaker 1: putting drawing a line in the sands so that people

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Speaker 1: shouldn't feel that there is risk of keeping money there

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Speaker 1: is what's critical. What we can't tell is what will

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Speaker 1: be the flow. Good news they had inflows in January,

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Speaker 1: which is the latest stats that at least I'm aware of.

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Speaker 1: It will be quite telling as that data comes. And

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Speaker 1: you know, we're fond of saying central banks are data

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Speaker 1: dependent in ways. This is going to be a data

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Speaker 1: dependent situation as well. Okay, Tim, thank you very much

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Speaker 1: for joining us. Tim Craig had their senior European equity

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Speaker 1: stratus at Bloomberg Intelligence. A great to get your view on.

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Speaker 1: There have been plenty of reaction, of course, that have

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Speaker 1: oppened store around credit season. Some of the biggest names

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Speaker 1: in finance. Leanne Garon's has been looking through some of

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Speaker 1: the reaction. Good morning to you, Leanne. Take us through

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Speaker 1: some of the commentry that you've read and other people

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Speaker 1: that you've been speaking to. Yes, indeed, Stephen, good morning tune.

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Speaker 1: I just want to pick up on something that Bloomberg's

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Speaker 1: senior Euro Area economist, David pal has said his credits

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Speaker 1: were too big to fail. Maybe, but it's actually too

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Speaker 1: big to ignore. So as you know, we are discussing

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Speaker 1: it today and when rates rise quickly, things get broken. Now.

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Speaker 1: That is a sentiment from Danny blanche Flower and Larry

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Speaker 1: Fink speaking to me yesterday. Danny blanch Flower, a former

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Speaker 1: Bank of England policymaker, told me confidence in banks has

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Speaker 1: fragile and it seems this has been in the offering

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Speaker 1: for a little while. Central banks raising rates around the

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Speaker 1: world without a clear reason was always going to create

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Speaker 1: another financial crisis, says blanch Flower. And black Rocks Larry Fink. Caroline,

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Speaker 1: speaking to Bloomberg, noted that the banking crisis could worsen

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Speaker 1: worrying a lund about cracks in the financial system that

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Speaker 1: formed during more than a decade of easy money and

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Speaker 1: also of these low interest rates and the collapse of

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Speaker 1: Silicon Valley Bank has really brought financial stability concerns back

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Speaker 1: to the forefront. If we have a look at that,

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Speaker 1: you remember SVV just unraveled so quickly last week, and

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Speaker 1: Bridgewater Associates Ray Dalio is expecting problems to start mounting

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Speaker 1: in the fallout from contractions and the debt and credit markets,

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Speaker 1: but says the recent failure of Silicon Valley Bank was

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Speaker 1: just a canary in the coal mine. This is Bloomberg

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Speaker 1: Daybreak Europe. You're morning brief on the stories making news

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Speaker 1: live each morning on London da BE Radio, the Bloomberg

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Speaker 1: station is also available on your Amazon Alexa devices. Just

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Speaker 1: say Alexa played Bloomberg eleven thirty. I'm Caroline Hitka and

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