Credit Suisse crisis fuels another weekend of fear as fear of ‘unknown unknowns’ grows among traders, money managers

Waking up at 6 am. Tennis dates cancelled. Anxiety checks bond prices while walking the dog.

These are just some of the scenes from traders and money managers over the weekend as the financial world prepares for the next and perhaps final act of Credit Suisse Group AG’s stunning and spectacular fall from grace.

For the second weekend in a row, traders around the world, from London to New York and Sao Paulo, were glued to their cellphones and laptops, watching the news, convening impromptu Zoom calls and waiting for marching orders – on high alert after another banking crisis. Last time it was Silicon Valley Bank, an American regional bank for startups. This time it’s Credit Suisse, once a titan of Switzerland’s most important banking industry.

Except for over-the-counter bond deals, most traders had little to do at closed markets as Swiss officials and UBS AG raced to seal a deal for all or parts of Credit Suisse on Saturday. Still, the quiet sense of dread about “what’s next” for the broader banking industry – and the global economy – after markets reopen on Monday was palpable.

“The situation with Credit Suisse and the US regional banks raises concerns about what we don’t know,” said Trevor Bateman, head of investment credit research at CIBC Asset Management. “We spent time over the weekend thinking through possible scenarios, outcomes and second- and third-order implications of these results. And the unknown unknowns.”

Many were working from home, a familiar routine since the Covid era. Some still headed to the office and set up conference calls. Goldman Sachs Group Inc. and Morgan Stanley were among bond desks open over the weekend, according to people familiar with the matter. A representative for Goldman declined to comment while Morgan Stanley did not immediately respond to a request for comment from Bloomberg.

Because bonds are traded over the counter, they can technically change hands at any time. But it is very unusual for trading to take place over the weekend.

However, there were unusual levels of activity in both SVB and Credit Suisse bonds. At least two sets of Credit Suisse price quotes bonds were sent on Saturday, copies of which were seen by Bloomberg. Senior bonds were quoted higher than traders, in some cases by 12 points. Given it’s the weekend, it’s unclear if trades were made at those levels.

The key issue in any deal with Credit Suisse is how the assets will be split and how that affects the company’s debt structure, according to one investor who trades credit default swaps for a bondholder of the Swiss bank.

He, like many others, plans to stay home over the weekend and catch the news on his phone.

“Everyone is actively checking news,” said Michael Sandberg, an equity derivatives trader at United First Partners. “Many of us are getting calls from clients looking to select opportunities as things unfold around the Credit Suisse situation.”

Calm before the storm

A money manager in Brussels, who spoke on condition of anonymity because he was not authorized to speak publicly, said the last time he could recall a similar situation was after Russia’s invasion of Ukraine, when marketers were unsure whether bond interest payments can be cleared.

In Sao Paulo, a credit trader at a major bank said the weekend was like a lull before a tsunami, when the ocean had receded and the incoming wall of water had not yet collapsed.

The trader, who spoke on condition of anonymity, didn’t get home until 2am on Friday and had an early wake-up call on Saturday after several hours of shut-eye. He was working from home at his gym after abandoning his plans to play tennis in the morning. It had been off and on since Wednesday, he said, but the trader still planned to go to the office later on Saturday.

– With help from Julia Morpurgo and Reshmi Basu.

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