Credit Suisse Group AG’s stock and bonds rallied on an aid package from the Swiss central bank, but there remained clear signs of nervousness about European banks.
(Bloomberg) — Credit Suisse Group AG’s stock and bonds rallied on an aid package from the Swiss central bank, but there remained clear signs of nervousness about European banks.
Credit Suisse jumped as much as 40% at the European open, before paring the advance to 22%, as traders voiced relief over a 50 billion franc ($54 billion) credit line from the Swiss National Bank. The Euro Stoxx Banks Index posted a small recovery, adding 1.5%, after plunging 8.4% yesterday in the biggest selloff since March 2020.
While stock market losses have subsided, there were still big questions about the future of Credit Suisse and how the financial industry will fare as higher interest rates keep eroding the value of lenders’ fixed-income holdings. In a single week, Credit Suisse lost more than a third of its market value before Thursday’s bounce, and analysts at JPMorgan Chase & Co. said the crisis of confidence will likely result in the bank being bought by a rival.
“Measures taken should provide some comfort that a spillover to the sector could be contained, but the situation remains uncertain,” Anke Reingen, an analyst at RBC Capital Markets, wrote in a note to clients Thursday.
Credit Suisse Taps $54 Billion From Central Bank; Shares Surge
In the bond market, credit-default swaps showed easing tension. Credit Suisse’s senior unsecured euro-denominated bonds due March 2029 recovered almost half of Wednesday’s losses, according to data compiled by Bloomberg. Commerzbank AG, Banco Santander SA, UniCredit SpA and Barclays Plc led gains among European banks.
In an interview with CNBC, Credit Suisse’s biggest shareholder said the lender isn’t likely to seek more capital and the bank is generally “sound.” Credit Suisse also announced at least its second debt repurchase in just the past six months as it looks to restore investor confidence.
“The initial fallout has been contained by the SNB’s backstop overnight, but I think the cat’s out of the bag in terms of the lagged damage that aggressive policy tightening can do to both the real economy and financial markets,” said Viraj Patel, a global macro strategist at Vanda Research in London. “There will remain a bit of nervousness in markets as investors wait to see what happens next.”
Fears of a contagion are overblown, said Mathieu Racheter, head of equity strategy at Bank Julius Baer & Co., though the market will remain nervous as its searches for “other weak links” after the collapse of Silicon Valley Bank and Credit Suisse’s woes.
“SVB issues appear idiosyncratic and investors are just in panic mode and selling the weakest links — Credit Suisse,” he said. “The latest developments will likely keep nervousness high.”
–With assistance from Jan-Patrick Barnert, Bruce Douglas, Olga Voitova and Julien Ponthus.
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