Wake-up call at 6 am. Canceled tennis dates. Anxious check-in on bond prices while walking the dog.
These are some of the views from traders and money managers over the weekend, as the finance world braces for the next and, perhaps, final act of Credit Suisse Group AG’s stunning and spectacular fall.
For the second straight weekend, traders around the world, from London to New York and Sao Paulo, were glued to their mobile phones and laptops, watching the news, making impromptu Zoom calls and waiting for marching orders. Were – another bank crisis in the wake of high alert. Last time, it was Silicon Valley Bank, a US regional bank for startups. This time, it’s Credit Suisse, once the titleholder of Switzerland’s all-important banking industry.
Except for over-the-counter trades in bonds, there was little to do with markets virtually closed for most traders, as Swiss authorities and UBS AG raced to put together a deal for all or part of Credit Suisse on Saturday. put. Yet a quiet sense of dread over “what comes next” for the broader banking industry – and the global economy – was still evident once markets reopened on Monday.
“What we don’t know about the situation at Credit Suisse and the US regional bank raises concerns,” said Trevor Bateman, head of investment-grade credit research at CIBC Asset Management. “We are spending time over the weekend considering possible scenarios, outcomes and second- and third-order impacts from these results. And the unknown unknowns.
Many worked from home, a now familiar Covid-era routine. Some were still going to the office and conducting conference calls. Goldman Sachs Group Inc and Morgan Stanley were among the 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.
Since bonds are traded over the counter, they can technically change hands at any time. But trading on the weekend is highly unusual.
Nevertheless, there was an unusual level of activity in the bonds of both SVB and Credit Suisse. At least two sets of price quotes on Credit Suisse bond were sent out on Saturday, copies of which were seen by Bloomberg. Senior bonds were being quoted up to 12 points in some cases by traders. Given that it is the weekend, it is not clear whether trades took place at these levels or not.
The key question in any Credit Suisse deal is figuring out how the assets will be split and how that affects the company’s debt structure, according to an investor who traded credit default swaps for the Swiss bank’s bondholders.
He, like many others, planned to stay home over the weekend and monitor the news from his phone.
“Everyone is actively checking the news,” said Michael Sandberg, equity derivatives sales trader at United First Partners. “We have been receiving calls from a number of clients looking to pick up on development opportunities on the Credit Suisse position.”
calm before the storm
A money manager in Brussels, who asked not to be identified because he was not authorized to speak publicly, said the last time he remembered a similar situation was after Russia invaded Ukraine, when the market People were unsure whether the interest payments on the bonds could be cleared.
In Sao Paulo, a credit trader at a major bank said the weekend was like the calm before the tsunami hit, when the sea had receded and the incoming wall of water had yet to come down.
The trader, who asked not to be identified, did not reach home till 2 pm on Friday and was woken up early on Saturday after a few hours of sleep. He was working from home in his gym clothes, leaving plans to play tennis in the morning. It’s been non-stop since Wednesday, he said, but the businessman still plans to go to the office later on Saturday.
—With assistance from Giulia Morpurgo and Reshmi Basu.
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