Executives spent the weekend calming nerves and issuing statements that the bank was in good shape, after concerns of a default had spread. The occasion was that Credit Suisse credit default swaps rose dramatically in price on Sept. 30, jumping 6 basis points to 247 bps. (It was at 57 at the beginning of the year.) Its stock is down by more than half, so far this year.
At that point, Credit Suisse’s CEO Ulrich Körner released a memo explaining that the bank had strong capital and plenty of liquidity. Their executives spent the weekend assuring clients and investors that everything was fine, which had the predictable effect. On Monday morning, Oct. 3, the bank’s stock went wild, going down as much as 12% at one point before coming back up again. That was the good news. The basis points jumped over 80 points in one day, up to around 335 bps! Will it be the weak point for the next hole in the bubble?
Financial gurus were quick to jump to the rescue, attempting to calm further fears of a systemic contagion, saying it is not related. Of note, and perhaps an indication of the wishful thinking of the financial community, John Vail, an investment strategist for an asset management company, told CNBC, “The silver lining at end of this period is the fact that central banks will probably start to relent some time, as both inflation is down and financial conditions worsen dramatically. I don’t think it’s the end of the world.”
