6 am wake up. Cancel the tennis date. Anxious check-in on bond prices while walking the dog.
These were just some of the scenes of traders and money managers over the weekend as the financial world braced for the next, and perhaps final, act of Credit Suisse Group AG’s spectacular and surprising fall from grace.
For the second straight weekend, traders around the world, from London to New York and São Paulo, are connected to their cell phones and laptops, watching the news, making impromptu Zoom calls and waiting for marching orders – on high alert as they happen. another bank crisis. Finally, there is Silicon Valley Bank, a US regional bank for startups. This time, Credit Suisse, once the most important titan of the Swiss banking industry.
Except for over-the-counter trade in bonds, there is little for most traders to actually do with the closed market, as Swiss officials and UBS AG race to put together a deal for all or part of Credit Suisse there. But the quiet fear of “what will happen” to the broader banking industry – and the global economy – if markets reopen Monday is still palpable.
“Credit Suisse and the state of US regional banks raise concerns about what we don’t know,” said Trevor Bateman, head of investment credit research at CIBC Asset Management. “We have spent time over the weekend considering possible scenarios, outcomes and the second and third order implications of those outcomes. And the unknowns.”
Many are working from home, a familiar routine in the Covid era. Some still go into the office and organize conference calls. Goldman Sachs Group Inc. and Morgan Stanley were among the open bond desks 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 Bloomberg’s request for comment.
Since bonds are traded over the counter, they can technically change hands at any time. But it is rare that trading is done on weekends.
However, there was an unusual level of activity in SVB and Credit Suisse bonds. At least two sets of price quotes at Credit Suisse bond sent on Saturday, a copy of which was seen by Bloomberg. Senior bonds were quoted higher by traders, in some cases up 12 points. As this is the weekend, it is unclear whether trades were made at that level.
A key question in any Credit Suisse transaction is finding out how the assets will be separated and how it will affect the company’s debt structure, according to one investor, who trades credit default swaps for the Swiss bank’s bondholders.
He, like many others, plans to stay home for the weekend, and monitor the news from his phone.
“Everyone is actively checking the news,” said Michael Sandberg, an equity derivatives sales trader at United First Partners. “Many of us receive calls from clients looking for an opportunity to cherry-pick when it comes to the Credit Suisse situation.”
Calm Before the Storm
A money manager in Brussels, who asked not to be identified because he is not authorized to speak publicly, said the last time he remembered a similar situation was after Russia attacked Ukraine, when people in the market were not sure whether interest payments on bonds were possible. cleaned.
In São Paulo, one credit trader at a major bank said the weekend was like the calm before the tsunami, when the sea receded and the incoming wall of water hadn’t collapsed.
The trader, who asked not to be identified, did not return home until 2am on Friday and got a wake-up call on Saturday after several hours of closing time. He works from home in his gym clothes, having given up on his plans to play tennis in the morning. It hasn’t stopped since Wednesday, he said, but the trader still plans to go to work later on Saturday.
–With assistance from Giulia Morpurgo and Reshmi Basu.