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

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6 a.m. wake-up calls. Cancelled tennis dates. Anxious check-ins on bond prices while walking the dog.

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

For a second straight weekend, traders across the world, from London to New York and São Paulo, were glued to their mobile phones and laptops, watching the news, convening impromptu Zoom calls and waiting for marching orders — on high alert in the wake of yet another bank crisis. Last time, it was Silicon Valley Bank, a US regional bank to startups. This time, it’s Credit Suisse, once a titan of Switzerland’s all-important banking industry.

Except for over-the-counter trades in bonds, there was little for most traders to actually do with markets closed, as Swiss officials and UBS AG raced to put together a deal for all or parts of Credit Suisse on Saturday. Yet a quiet sense of dread over “what comes next” for the broader banking industry — and the global economy — once markets reopen Monday was palpable nonetheless.

“Credit Suisse and the US regional bank situation raises concern about what we don’t know,” said Trevor Bateman, head of investment-grade credit research at CIBC Asset Management. “We have been spending time over the weekend to consider possible scenarios, outcomes and second- and third-order implications from these outcomes. And the unknown unknowns.”

Many worked from home, a now-familiar Covid-era routine. Some still headed into the office and organized 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 didn’t 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 it’s highly uncommon for trading to take place over weekend.

Still, there were unusual levels of activity in bonds of both SVB and Credit Suisse. At least two sets of price quotes on Credit Suisse bonds were sent out on Saturday, copies of which were seen by Bloomberg. The senior bonds were being quoted higher by traders, in some cases up 12 points. Given that it’s the weekend, it’s unclear whether trades were made at these levels.

The key question in any Credit Suisse deal is finding out how the assets will be split apart and how it 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, planned to stay home over the weekend, and monitor the news from his phone.

“Everyone is actively checking news,” said Michael Sandberg, equity derivatives sales trader at United First Partners. “Many of us are getting calls from clients who are looking to cherry-pick opportunities as things develop on the Credit Suisse situation.”

Calm Before Storm

A money manager in Brussels, who asked not to be identified because he wasn’t authorized to speak publicly, said the last time he remembered a similar situation was after Russia invaded Ukraine, when people in the market were uncertain whether interest payments on bonds could be cleared. 

In São Paulo, one credit trader at a major bank said the weekend was like the calm before a tsunami hits, when the ocean has receded and the incoming wall of water has yet to crash down.

The trader, who asked not to be identified, didn’t get home until 2 a.m. on Friday and got an early wake-up call on Saturday after a few hours of shut-eye. He was working from home in his gym clothes, having given up on plans to play tennis in the morning. It’s been non-stop since Wednesday, he said, but the trader still planned to head into the office later on Saturday.

–With assistance from Giulia Morpurgo and Reshmi Basu.

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