Wake up at 6am. Canceled tennis dates. Anxious checks on bond prices while walking the dog.
These are just some of the scenes of traders and fund managers over the weekend as the world of finance braced for the next, and possibly the final act, of the staggering and dramatic fall in Credit Suisse Group AG.
For a second weekend in a row, traders around the world, from London to New York and São Paulo, were glued to their cellphones and laptops, watching the news, summoning impromptu Zoom calls and awaiting market orders – on high alert following yet another banking crisis. The last time was Silicon Valley Bank, an American regional bank for startups. This time it’s Credit Suisse, once a titan of the important Swiss banking industry.
With the exception of over-the-counter bond trades, most traders had little to do with the markets closed, as Swiss officials and UBS AG rushed to strike a deal for all or part of the Credit Suisse on Saturday. Still, a slight sense of dread over “what comes next” for the wider banking sector – and the global economy – once markets reopen on Monday was nonetheless palpable.
“The situation at Credit Suisse and U.S. regional banks raises concerns about what we don’t know,” said Trevor Bateman, head of investment grade credit research at CIBC Asset Management. “We spent time over the weekend looking at possible scenarios, outcomes and the second and third order implications of these outcomes. And the unknown unknowns.
Many were working from home, a routine now familiar from the Covid era. Some still headed to the office and held conference calls. Goldman Sachs Group Inc. and Morgan Stanley were among the bond counters 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 Bloomberg request for comment.
Since bonds are traded over-the-counter, they can technically change hands at any time. But it is very rare that the exchanges take place on weekends.
Nonetheless, bond activity levels for SVB and Credit Suisse were unusual. At least two sets of price quotes on Credit Suisse obligations were sent on Saturday, copies of which were seen by Bloomberg. Senior bonds were quoted higher by traders, in some cases up 12 points. Given that it is the weekend, it is unclear if any trades were made at these levels.
The key question in any Credit Suisse deal is how assets will be segregated and how that will affect the company’s debt structure, according to an investor, who trades credit default swaps for a bondholder. the Swiss bank.
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. “Many of us are getting calls from clients looking to seize opportunities as things evolve on the Credit Suisse situation.”
Calm before the storm
A fund 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 market participants were unsure whether interest payments on the bonds could be erased.
In São Paulo, a credit broker from a major bank said the weekend was like the calm before a tsunami hit, when the ocean receded and the incoming wall of water s hasn’t collapsed yet.
The shopkeeper, who asked not to be identified, did not return home until 2 a.m. on Friday and received an early wake-up call on Saturday after a few hours of sleep. He was working from home in his sports clothes, having given up playing tennis in the morning. It’s been non-stop since Wednesday, he said, but the trader was still planning to get to the office later on Saturday.
–With the help of Giulia Morpurgo and Reshmi Basu.