No weekend for traders as banking problems deepen

(Bloomberg) — A 6 a.m. wake-up call. Tennis days cancelled. Exciting check-ins on bond prices while walking the dog.

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

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

Apart from OTC trades in bonds, most traders had little to do after the market closed as Swiss authorities and UBS AG raced on Saturday to close the deal for all or part of Credit Suisse. However, the quiet fear of what comes next as markets in the broader banking sector – and the global economy – opened on Monday was palpable.

“What we don’t know about Credit Suisse and the state of US regional banks raises concerns,” said Trevor Bateman, head of investment-grade credit research at CIBC Asset Management. “We’ve spent time over the weekend thinking about possible scenarios, outcomes, and the secondary and tertiary consequences of those outcomes. And unknown unknowns.”

Many worked from home, a now familiar routine in the Covid era. Some still headed to the office and arranged conference calls. Goldman Sachs Group Inc. and Morgan Stanley were among 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 Bloomberg’s request for comment.

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Because bonds are traded over the counter, they can technically change hands at any time. But it is very rare for trading to happen on a weekend.

Still, there was unusual activity in both SVB and Credit Suisse bonds. At least two price quotes for Credit Suisse bonds were sent on Saturday, copies of which were seen by Bloomberg. Investors quoted senior bonds higher, in some cases up to 12 points. As it is the weekend, it is unclear if trades were made at these levels.

A key issue in any Credit Suisse deal is how assets are distributed and how that affects the company’s debt structure, says one investor who trades credit default swaps for the Swiss bank’s bondholder.

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

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“Everybody is actively following the news,” said Michael Sandberg, an equity derivatives salesman at United First Partners. “Many of us are getting calls from clients looking to pick up opportunities as the Credit Suisse situation develops.”

Calm before the storm

A money manager in Brussels, who asked not to be identified because he was not authorized to speak publicly, said he last remembered a similar situation after the Russian occupation of Ukraine, when people in the market were unsure whether the bond could make interest payments. to be emptied.

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

The businessman, who asked to remain anonymous, didn’t get home until 2 a.m. on Friday and received an early wake-up call on Saturday after a few hours of silence. He worked from home in his gym clothes after abandoning plans to play tennis in the morning. He said it has been non-stop since Wednesday, but the shopkeeper still planned to head to the office later on Saturday.

— with assistance from Giulia Morpurgo and Reshmi Basu.

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