Credit Suisse CDS Reach Crisis Levels as Banks Rush to Buy Protection – by Abhinav Ramnarayan and Eliza Ronalds-Hannon (Bloomberg News – March 15, 2023)

(Bloomberg) — The cost of credit derivatives linked to Credit Suisse Group AG are blowing out to levels reminiscent of the financial panic of 2008 after the lender’s biggest shareholder said it doesn’t want to boost its stake.

The moves are being exacerbated by banks rushing to buy protection against a possible default by the Zurich-based firm to reduce their counterparty risk on trades, according to people with knowledge of the matter.

In a chaotic day of trading, quotes for one-year credit default swaps were considerably more expensive than the offers for longer durations as lenders tried to give themselves a near-term shield from their exposure to the lender, the people said.

Bid-ask spreads were as much as 10 points apart upfront they said, asking not to be named because they aren’t authorized to speak publicly. So far, the moves are limited to Credit Suisse and haven’t spread to other lenders. The bank declined to comment.

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