ZURICH (Reuters) – Some banks may have to get help from the state as plunging share prices could make it difficult to raise capital, UBS (UBSN.VX) chief executive Oswald Gruebel told Swiss newspaper Sonntag in an interview published on Sunday.

Gruebel said his comment did not apply to the top two Swiss banks as Credit Suisse (CSGN.VX) and UBS were now less likely, compared with 2008, to be affected by European banks that found themselves in difficulty given that interbank trading was no longer as important.

Gruebel said future returns from investment banking were unlikely to be 20 percent and above but around 10 percent, adding this also applied to the big players on Wall Street.

UBS itself had to be rescued by the state in 2008 after massive losses on toxic assets.

Gruebel criticized the Swiss National Bank’s recent move to set an exchange rate cap on the Swiss franc at 1.20 euros.

“We, as a small country with the franc, can’t dictate an exchange rate against the euro. That is impossible in the long term. Despite this, I hope the effect that has been reached is sustainable,” he said.

Separately, Credit Suisse chairman Urs Rohner, interviewed by NZZ am Sonntag, welcomed the SNB move to cap the franc.

“The franc was massively overvalued, as the actual purchasing power of the euro is estimated at about 1.35 francs to 1.40 francs,” Rohner was quoted as saying.

Credit Suisse analysts expect the euro to rise to 1.25 francs in the next three months and to 1.30 francs in the next 12 months, Rohner said.

(Reporting by Katie Reid; Editing by Dan Lalor)

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ZURICH (Reuters) – U.S. authorities now have statistical data from the ten Swiss banks being investigated by the United States for helping U.S. clients to dodge taxes, Swiss newspaper Neue Zuercher Zeitung reported on Saturday.

TagesAnzeiger, another Swiss newspaper, reported that the Swiss banks now had until Sept 23 to hand over more specific client data.

Credit Suisse (CSGN.VX), which is one of the banks under investigation, had already handed over data earlier in the week, while the nine other banks had handed over the data through an intermediary on Friday, NZZ said without citing any sources.

The newspaper also said the Swiss government had given them “plenty of rope” to do this.

Mario Tuor, spokesman for the Swiss department for international financial affairs, declined to comment on the NZZ and TagesAnzeiger reports, but he said: “We are still going for a solution on the basis of existing legal rules in Switzerland.”

Late on Friday, Reuters reported that the United States was drafting legal documents, seeking to force nearly a dozen Swiss banks and international banks with Swiss branches to disclose the identities of American clients that evaded taxes.

Also on Friday, Swiss newspaper Blick said that Switzerland had given the United States an estimate of the number of its citizens who used secret accounts to avoid paying taxes between 2002 and 2010.

Swiss foreign minister Micheline Calmy Rey said on Wednesday that Switzerland had given the U.S. statistical data about the extent of U.S. taxpayers, but had not handed over any bank client data.

Handing over statistical data is possible within the current Swiss law that protects banking secrecy.

Switzerland, a noted tax haven that is the global capital of offshore private banking, has been under attack from U.S. Justice Department and Internal Revenue Service officials conducting a broad criminal investigation into private banking services that U.S. authorities say enabled wealthy Americans to evade billions of dollars in taxes.

The Justice Department served a target letter in July on Credit Suisse, Switzerland’s second-largest bank, notifying it that it was the focus of a criminal investigation. American authorities also are probing HSBC (HSBA.L) and smaller Swiss private banks and cantonal banks, including Basler Kantonalbank, Wegelin and Julius Baer (BAER.VX).

The Justice Department is trying to determine the total volume of unreported accounts held at Swiss banks. Officials suspect the accounts hold assets in the tens of billions of dollars and possibly more.

(Reporting by Katie Reid; Editing by Toby Chopra)

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Bangalore (Reuters) – Bank of America Corp officials have discussed slashing roughly 40,000 jobs during the first wave of a restructuring, the Wall Street Journal said, citing people familiar with the plans.

The number of job cuts are not final and could change. The restructuring aims to reduce the bank’s workforce of 280,000 over a period of years, the Journal said.

BofA could not immediately be reached for comment by Reuters outside regular U.S. business hours.

The Journal said BofA executives met Thursday at Charlotte, North Carolina, where the bank is headquartered, and will gather again Friday to make final decisions on the reductions, putting the finishing touches on five months of work.

Investors are pressing BofA to improve its performance after it lost money in four of the last six quarters and its stock has fallen by half this year.

The Journal said the proposed job cuts may exceed BofA’s last big cutback in 2008 when it called for 30,000 to 35,000 job cuts over three years. That move was triggered by an economic slowdown and the planned takeover of securities firm Merrill Lynch & Co.

Earlier this month, the Charlotte Observer reported that BofA executives were discussing plans to potentially shed 25,000 to 30,000 jobs over the next several years.

BofA had earlier planned to cut 3,500 jobs, its Chief Executive Brian Moynihan had said in a memo to staff on August 18, as it tries to come to grips with $1 trillion of problem home mortgages.

BofA announced a far-reaching reorganization of its senior management team on Tuesday, which included the departure of consumer bank chief Joe Price and wealth management head Sallie Krawcheck.

Banks are shedding jobs worldwide as stricter regulations and a tough second quarter for trading income take their toll on investment banking units in particular.

More than 70,000 staff cuts have been announced this year or are reported to be in the works at U.S. and European banks, some of them to be lost over three or four year programs.

(Reporting by Sakthi Prasad in Bangalore; Editing by Anshuman Daga)

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(Reuters) – Ratings agency Standard & Poor’s officials privately met with large bond investors weeks before the firm’s U.S. debt downgrade, leaving some believing the chance of a rating downgrade was higher than they had previously thought, the Wall Street Journal said.

In the run-up to the debt downgrade, S&P officials had visited large bond firms including Allianz SE’s Pacific Investment Management Co (Pimco), TCW Group Inc, Legg Mason Inc’s Western Asset Management and BlackRock Inc, the Journal said, citing people who either attended the meetings or were briefed on them afterwards.

Some of the investors say they came away with a stronger sense the nation’s debt rating would be cut, according to the Journal.

An S&P spokesman told the Journal that its analysts “are in contact regularly with market participants including investors, policy makers, and the press regarding our published ratings and analyses,” and the firm “maintains policies that govern our interaction with such third parties, which include a requirement that analysts limit their comments on rating-related matters to previously published material.”

None of the parties could be immediately reached for comment by Reuters outside regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Muralikumar Anantharaman)

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Bangalore (Reuters) – AT&T Inc can lower the price it pays for T-Mobile USA Inc if the remedies requested by regulators become too expensive, a Bloomberg report said, citing three people with direct knowledge of the merger contract.

AT&T would be able to pay less than the deal’s original $39 billion value if regulators demand asset sales that surpass 20 percent of that figure, or about $7.8 billion, the report cited unnamed people as saying.

AT&T could walk away from the deal and pay the breakup fee if the concessions requested top 40 percent of that value, the report said.

On August 31, the U.S. government sued to block AT&T’s purchase of T-mobile citing concerns it would harm competition in the wireless prices and lead to higher prices.

Dallas-based AT&T agreed to compensate T-Mobile parent Deutsche Telekom AG (DTE) with $3 billion in cash, wireless spectrum and roaming agreements if the deal isn’t completed.

AT&T and Deutsche Telekom could not be immediately reached for a comment on the Bloomberg report.

(Reporting by Shravya Jain in Bangalore, editing by Bernard Orr)

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WASHINGTON (Reuters) – President Barack Obama, facing waning confidence among Americans in his economic stewardship, plans to lay out a $300 billion job-creation package on Thursday, CNN reported, citing Democratic sources.

The proposed new spending, to be announced by Obama in a nationally televised speech to Congress, would be offset by budget cuts, the report said, signaling that the Democratic president hopes to mollify the concerns of Republican fiscal hawks resistant to his jobs ideas.

There was no immediate comment from the White House.

Obama’s aides have refused to go public with the estimated cost of Obama’s package or provide many specifics in advance, except to say that the proposals will have a “quick and positive” impact on boosting jobs at a time of stubbornly high U.S. unemployment.

Confidence in Obama’s management of the economy has been hit by months of bad economic news and several polls on Tuesday showed fresh declines in his job approval ratings.

Obama hopes to start reversing this trend in an address to a joint session of Congress on Thursday, in which he will try to convince voters that he has a better economic recovery plan than his Republican opponents.

“We need to do things that will have a direct impact in the short-term to grow the economy and create jobs and the president will put forward proposals that will do just that,” White House spokesman Jay Carney said.

Obama fought Republicans all summer to lift the U.S. debt ceiling in a bitter debate that saw rating agency Standard & Poor’s cut the U.S. AAA credit rating, and he must now get lawmakers to back additional spending that many oppose.

However, the president is seeking congressional support at a time when his own prospects of re-election have worsened.

An NBC News/Wall Street Journal poll showed Obama’s job approval rating at a low of 44 percent, while an ABC News/ Washington Post poll found that six in 10 Americans now rate the president’s job on the economy and jobs negatively.

A third survey by Politico and George Washington University found that 72 percent of voters believe the country is either strongly or somewhat headed in the wrong direction, a jump of 12 percent since last May.

Obama must get unemployment down from levels currently above 9 percent to improve his chances of winning a second White House term in the November 2012 election.

The president has already touched on a various steps Congress could take to lift growth and hiring, including infrastructure spending, business tax breaks, and extending a payroll tax cut and aid for the long-term unemployed.

Carney declined to lay out any specifics but said the measures Obama would recommend would yield a “direct, quick and positive impact” on the U.S. economy if they were enacted by Congress.

Republicans criticized Obama for not including them in discussions on the package before his big speech and indicated any jobs bills could face tough passage through Congress, where they control the U.S. House of Representatives.

“I have no doubt the president will propose many things on Thursday that, when looked at individually, sound pretty good, or that he’ll call them all bipartisan. I’m equally certain that, taken as whole, they’ll represent more of the same failed approach,” said the top Senate Republican, Mitch McConnell.

Republican House leaders separately wrote to Obama urging him to repeal “excessive, job-destroying regulations” and laying out possible areas of common ground, including reforms to the unemployment system and free trade agreements.

(Reporting by Alister Bull, Laura MacInnis, Matt Spetalnick, Joanne Allen and David Morgan; editing by Cynthia Osterman)

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On Thursday, global core bonds started the session on a weaker footing, but later on weakness in various US economic reports supported bonds, the safe haven in times of risk aversion. However, bonds have risen outstandingly in recent weeks and are at very expensive levels and the rally is showing signs of fatigue. Therefore, selling re-appeared when US equities struggled back higher during the US session. Technical factors and the upcoming payrolls reports certainly impacted trading. The S&P tested extensively the downside (see graph), pushing bonds to new intra-day highs, but equity investors were cautious ahead of the payrolls release and thus took a more neutral position, allowing the equities to limit the daily losses. Similarly, bond investors didn’t want to push long positioning to the extreme and sold the market when equities turned. So, at the end of the day, despite weak eco data, US yields were, albeit it marginally, higher. The 2- and 5-year yields were up 2.5- to-3 bps, while further out increases were minimal.

In the intra-EMU market, there was initially some selling of peripherals on the back of Moody’s decision to put Spain’s AAA on review for downgrade, but the decision was fast digested and damage limited. The surprisingly low demand at the ECB 3-month LTRO auction on Tuesday have eased fears about the funding stress and the 6-day fine tuning liquidity operation did nothing to turn the sentiment again in a more negative way, on the contrary. Rumours that all German banks would have passed the stress tests got a lot of attentions, while Spanish able to sell €3.5B of 5- year bonds was in such a context embraced as a positive too. So, looking through the intra-day wiggles, spreads to German bonds were narrower, a little bit at the 10-year sector, but not surprisingly more at the 2-year sector (where easing liquidity concerns are a more important factor). Interestingly, the flattening continued in the German market, due to successful liquidity operations and easing fears on the financial sector, as the 2-year yield was up 7.7 bps, the 5-year 1.7 bps higher, but 10 and 30-year yields were actually down 1.1 and 3.3 bps.

Today, all attention will go to the June US payrolls report. The EMU eco data, unemployment and PPI, are uneventful for markets and so is the other US eco release, the factory orders. The market reaction might be very dense, as the bond market will be closed on Monday in observance of the July 4 market holiday. Many trading desks will be sparsely staffed.

In May, the payrolls report was a big disappointment for markets as private payrolls (41K) fell back sharply after a decent April-rise (218K). Last month, also the claims continued to trend somewhat higher, which have raised concerns by the government and also the Federal Reserve, but which might also have been due to workers falling off the census payrolls. If the (private) payrolls would again be weaker than expected, markets will take it as a serious sign that the labour market is cooling again after some improvement since the start of the year. It would also question the outlook for the overall economy, as strong payrolls are needed to support household income and thus consumption spending, at a time the impact of the government support starts to weaken. Yesterday’s ISM, claims, pending home sales and car sales showed signs of weakening activity in all main sectors of the economy. The consensus is looking for a decline in the overall payrolls by 125 000, but weakness is mostly due to the Census 2010 workers being discharged (+/- 230K). Therefore, more important is the private payrolls reading, which is forecasted to show an increase by 110 000 in June (from 41K in May). This figure is slightly below the three-month average (139 000). The ADP report published on Wednesday was quite weak (+13K private jobs) and also claims and ISM employment, all suggest the risks might be on the downside of expectations. However, on the other hand, there are suspicions that the May weakness in private payrolls was due to the census workers hired (partially from private sector), an effect that might have been partially reversed in June. So, concluding, the payrolls may surprise on either side of consensus. As a rule of thumb, to have a decent reaction, the actual figure should be about 50 000 off consensus, with the secondary details of the report giving colour to the reaction on the headline.

Given the pessimism in the past two weeks, we think that the US equity market may have the inclination to react asymmetrically to the payrolls report, rebounding stronger in case payrolls exceed consensus than dropping in case the outcome is weaker than expected. In case of an outcome in line with expectations, that may already be enough to keep equity indices above major support levels. or even about as expected.

However, given the proximity of the key support area (1029/1040) for the S&P (under test), a further decline of the S&P should not be ignored, as technical selling might kick in. It would also technically (head and shoulder) suggest the start of a downtrend. Next support levels are situated at 1007 (38% retracement), 957/938 (1 and 2 target H&S) and the very major 943 (neckline previous inverted H&S that signalled the end of the sharp crash of 2008/09).

Regarding US Treasuries, a stronger payrolls outcome would definitely be negative. Indeed, US Treasury had a terrible strong run of late and 10-year yields (now 2.94%) dropped a stunning 105 bps since its peak in early April, and was only lower once in the last 50 years, notably in the November 2008/April 2009 period. The 2-year yield even set an all-time low this week at 0.58%. Very recent price action showed that Treasuries had difficulties to sustain the rally, even in case of Tfriendly developments. There are signs of fatigue and many investors are ready to book profits. So, Treasuries looks vulnerable in all scenarios, but a very dark one (risk on deflation/depression). Also, we are a bit surprised that the sharp decline of the dollar yesterday, hadn’t a negative impact on Treasuries. Is this sustainable? Therefore, we would consider a tactical short position in Treasuries.

Also the German bonds look vulnerable to profit taking, but less than the US Treasuries that outperformed German bonds sharply. The 10-year yield spread halved in less than 1 month to 36 bps. The Bund has probably entered a sideways trading range between 129.93 (contract high) and 127.58/12.

As we are close to the highs, investors might contemplate profit taking on longs. Outright shorts are not advised for investors with a medium term perspective, as the technical picture is after all bullish and fundamentals are also bond positive, even if the price is at very lofty levels.

The ECB allotted €111.2B at its 6-fay fine-turning operation (fixed rate of 1%). 78 banks participated. IF we take into account also yesterday’s LTRO (€132B) and Tuesday’s regular weekly MRO (€162B), a total of 405B in liquidity was allotted, while €593B matured (€442B in 1-year and €151B in weekly MRO) or an absorption of about €190B. As yesterday, €309B of liquidity was parked at the ECB deposit facility, the excess liquidity might still be around €120B. Taking all the operations into account, we deduct that there was less funding stress in the system than previously thought. The ECB might see this as a success and thus plan to pursue the exit strategy, without however putting into question the partial reversal of this exit policy. Indeed, the ECB will hold still FR/FA 3 month auctions at the end of July, August and September effectively giving banks guarantee on unlimited liquidity till the end of the year. However, markets may anticipate that the ECB could withdraw liquidity early 2011. This should already now affect the longer end of the money market.

There is another, less positive interpretation of the tender results. If the lower bidding is due to the change in duration of the funds (3 month instead of 12months), then one shouldn’t draw too many conclusions from the tender results for the health of the system. Indeed, the “healthy” banks may have bid massively last June because the 1-year liquidity gave them a nice investment opportunity (buying T-bills or shorter-dated bonds of peripherals for the nice yield pick-up) and that opportunity may not be available anymore today (3 month money and lack of appetite for peripherals). In that case. The lower bidding wouldn’t be a sign of reduced stress and the ability of the ECB to exit its emergency liquidity policy might still be put into question. We might more clues from the bidding behaviour in the next weeks.

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Published on Fri, Jul 2 2010, 07:43 GMT

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