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Bad Bet On Treasuries Hammers UBS Profits

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The Swiss can’t catch a break. Last week rumors insisted that Credit Swiss had suffered bigger than reported losses from derivatives trading. As we mentioned briefly in the Opening Bell this morning, today UBS unveiled its third-quarter financials showing a 21 percent drop in profits, led largely downward by its proprietary trading unit which seems to have made some bad bets in the market for US Treasuries. As signs of a slowing economy led many to expect there would be no further rate increases from the Federal Reserve, Treasuries shot upward. UBS apparently found itself on the wrong side of the trades.
The proprietary trading units of investment banks--where banks trade on their own account--are the divisions that most make the banks look like hedge funds, so its no surprise to see that these things blow up like hedge funds occassionally do. Later this week Credit Suisse will unveil it's quarterly numbers, and so we should see whether the rumors of trading losses there are right.
UBS Reports 21% Decline in Profit on Trading Slump [Bloomberg]