investors weigh UBS’ takeover of Credit Suisse


U.S. Treasury yields fell on Monday as investors considered the stability of the banking sector after Swiss bank UBS agreed to buy its rival Credit Suisse.

At 5:26 a.m. ET, the yield on the 10-year Treasury was down by over six basis points to 3.3319%. The 2-year Treasury yield was trading at around 3.7155% after falling by around 13 basis points.

Yields and prices move in opposite directions and one basis point equals 0.01%.

Investors weighed the outlook for the banking sector as regulators worked to curb concerns about a banking sector crisis affecting both regional and global financial institutions.

Over the weekend, the Swiss National Bank, the Swiss Financial Market Supervisory Authority and the Swiss government worked on the takeover of Credit Suisse by UBS, the two largest Swiss banks.

As part of the deal, the Swiss National Bank and Swiss government also announced they would take measures to support the deal, including a loan of up to 100 billion Swiss francs ($108 billion).  

Last week, Credit Suisse’s biggest investor, the Saudi National Bank, said it could no longer support the Swiss bank financially. The bank was also affected by the recent collapse of Silicon Valley Bank and Signature Bank, which sparked fears about the stability of the financial system and prompted the Federal Reserve to implement support measures.

On Sunday, the Fed announced a joint liquidity operation with several other central banks around the world. In a statement, the Fed said the new measure would “serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses.”

The Fed’s next meeting is due to begin Tuesday, with a fresh interest rate policy decision expected Wednesday. A 25 basis point rate increase is widely expected as many believe the central bank will aim to find a middle ground between pursuing its goal of cooling the economy and supporting the financial system’s stability.