Bye-bye Credit Suisse Bank?
What is a Credit Default Swap (CDS)? It’s basically buying an insurance policy on a business as protection against the business going bankrupt. The higher the risk of business default, the higher the price of the CDS contract on that business.
Well, the CDS for Credit Suisse Bank went parabolic today as investors bet that CS is going belly up.
The selling pressure on Credit Suisse shares returned thanks to the collapse of SVB, sparking a crisis of confidence throughout the banking industry in the Western world. As a result, the Zurich-based lender’s five-year credit default swaps jumped to a record high of 448 basis points, data compiled by Bloomberg show.
CS share prices hit another record low and depositors have pulled out a record $125 billion in cash so far this year.
What about the Default Insurance (CDS) Prices of other Big Banks?
As I reported last Friday, keep an eye on Bank of America (pink line) and Deutsche Bank (red line).
This is what we call a hyperbolic path rapidly accelerating into the NOT GOOD zone.
Notably absent from the CDS spread-widening volatility (reported above) today are Wells Fargo and JPM-Chase banks.
I expect JPM to benefit dramatically from the current volatility via increased deposit transfers from other banks and they may go on a buying spree, purchasing smaller, competitive banks for pennies on the dollar.
Case and point – HSBC bank just purchased SVB Bank’s UK operations for one British Pound… Yep! 1.00£
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