Credit Suisse CDS Headed to the Same Level as 2008 Crisis

Bank buildings in the skyline of a city with banks such as HSBC or JPMorgan Credit Suisse

Credit Default Swaps on Credit Suisse are getting closer to the same levels they had as during the 2008’s Lehman Brothers collapse according to data shared by Bloomberg and BondEvalue. This comes at a moment in which Credit Suisse stock is also tanking alongside other banks such as Deutsche Bank. Meanwhile, other financial indicators show that we could be headed towards a global financial crisis. 

What’s Happening to Credit Suisse?

Credit Suisse’s CDSs are getting very close to the same level they had during the financial crisis that hit the world in 2008 with the collapse of Lehman Brothers. At the same time, its stock is tanking even more than during the last financial crisis, which encouraged Satoshi Nakamoto to release Bitcoin (BTC). 

On Twitter, rumours have spread about a possibly difficult situation for the bank. Credit Suisse’s Chief Financial Officer (CFO) said that the “bank is at critical moment,” as it prepares for its latest overhaul. 

It is worth taking into consideration that both Credit Suisse and Deutsche Bank are designated as systemically important financial institutions (SIFI). That means that they might have special treatment in case they experience financial issues. Indeed, they could be considered banks that are “too big to fail.”

Monday could be a very hard day for these two banks, especially for Credit Suisse. Let’s not forget that the U.S: Federal Reserve (FED) is going to have a closed board meeting on October 3, 2022. Therefore, this could be a week with larger volatility. 

There are many other things to consider as well when it comes to financial stability. Europe is in the middle of a geopolitical conflict that involves Russia and Ukraine. Russia has annexed three provinces of Easter and Southern Ukraine, and North Stream 2 and 1 pipelines in the Baltic Sea have been destroyed last week. 

This is pushing Europe towards an unprecedented energy crisis. Several companies in the continent have already shut down their operations due to impossible-to-pay electricity and gas bills, especially for small companies that do not have the strength and flexibility to pay these bills. 

Meanwhile, Bitcoin remains stable at $19,250 with a market capitalization of $369 billion. It has been surprising to see how this virtual currency remained in a trading range between $18,000 and $20,000 over the past weeks. During the same period of time, the British pound (GBP) reached its lowest level in history against the U.S. Dollar (USD). The Euro (EUR) has also plummeted below parity (the lowest level in over 20 years) and the outlook for the coming weeks is not very positive, especially with inflation rates that are at record highs. 

This week could be quite moved and volatile for markets, including Bitcoin, which has been quite stable despite stocks moving lower. The main focus will be on the geopolitical crisis with Russia, Credit Suisse’s problems, and the FED event on Monday.

Jonathan Gibson

Jonathan Gibson