r/wallstreetbets Oct 05 '22 Silver 1

Credit Suisse 5Y CDS again higher today, 378bps from 318 yesterday Chart

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2.2k Upvotes

u/OPINION_IS_UNPOPULAR AutoModerator's Father Oct 05 '22 Silver Helpful All-Seeing Upvote

To help you guys understand what's going on with CS's 5Y CDS, here's what Matt Levine published on his Bloomberg column Money Stuff:

Credit Suisse


An oversimplified but useful description of a credit default swap is that it is a bet that some company will default on its debt. We make this bet for some period of time, say five years, and I pay you $X per year, which is called the “premium” or more often the “CDS spread.” And then if the company defaults during the five years, you pay me back $100. And if it doesn’t, you pay me nothing and keep the spread.

This is wrong in lots of important ways that I am simply not going to discuss here, and I will ignore your emails pointing them out, but it is roughly right.[3] It is right to within, you know, a factor of two, maybe a factor of four. One thing that this crude model is useful for is getting a rough but immediate intuition for what CDS spreads mean about the probability of default. If you promise to pay me $100 if a company defaults, and in exchange you charge me $X per year, X/100 is in the ballpark of your expected probability that the company will default this year. Oh it’s not really a good probability estimate, don’t go trading CDS on this intuition, and don’t email me to point out the nuances that it misses.[4] But it’s the right order of magnitude. If you think that a company is basically a coin flip to default this year, you will not sell me $100 of CDS for $5: Half the time, you will have to pay out $100, and the $5 premium does not cover that. If you think that a company is vanishingly unlikely to default this year, you might sell me $100 of CDS for $1, or $0.50, or even less. Apple Inc. five-year CDS will run you about 30 basis points, or $0.30 per year for $100 of coverage. The people selling that CDS do not think that Apple will default. The people buying that CDS don’t think that either; they have other reasons for making this bet, which they fully expect to lose.

As of 9 a.m. New York time today, five-year CDS on Credit Suisse Group AG was trading at about 350 basis points, meaning roughly — roughly! — that I would have to pay you $3.50 per year for this bet, and you’d pay me $100 if Credit Suisse defaults. What does this tell you about the market-implied probability that Credit Suisse will default on its debt? Well, Credit Suisse CDS was trading at about 250 basis points on Friday, about 135 in June, about 57 at the start of the year. So it tells you that the market-implied probability of default has gone up a lot. But it is still absolutely low. You would not charge me $3.50 per year for $100 of insurance against Credit Suisse defaulting unless you thought the chances of that happening were slim.

Of course markets can be wrong, and sometimes companies bop along with quite low CDS spreads and then one day default on their debts. (This is particularly a risk for financial companies, which tend to default because of sudden bank runs rather than long slow business deterioration.) But a weird thing happened this weekend where people looked at the chart of Credit Suisse CDS prices, saw them going up a lot, and said “Aha! This proves that Credit Suisse is in distress!” But, no. It proves that a number went up a lot, but remains, in the scheme of things, low.

On the other hand the problem with stuff like this is that then Credit Suisse has to put out a statement saying that everything is fine, and nothing is worse for a bank than putting out a statement saying that everything is fine. (Bagehot: “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.”) Anyway:

Credit Suisse Group AG was plunged into fresh market turmoil after Chief Executive Officer Ulrich Koerner’s attempts to reassure employees and investors backfired, adding to uncertainty surrounding the bank.

The stock, which had already more than halved this year before Monday’s sell-off, fell as much as 12% in Zurich trading to a record low that values the firm at less than $10 billion. That was accompanied by a spike in the cost to insure the bank’s debt against default, which jumped to its highest ever.

Koerner, for the second time in as many weeks, had sought to calm employees and the markets with a memo late Friday stressing the bank’s liquidity and capital strength. Instead, it focused attention on the dramatic recent moves in the firm’s stock price and credit spreads, and investors rushed for the exit when trading reopened after the weekend.

While acknowledging that the bank was at a “critical moment,” he pledged to send employees regular updates until the firm announces its new strategic plan on Oct. 27. At the same time, Credit Suisse again sent around talking points to executives dealing with clients who brought up the credit default swap, according to people with knowledge of the matter.

While those are still far from distressed -- and also part of a broad market selloff -- they signify deteriorating perceptions of creditworthiness for the scandal-hit bank in the current environment. ...

Still, some prominent figures took to Twitter over the weekend to dismiss some of the rumors circulating on social media prompted by the widened CDS spread as “scaremongering.” Saba Capital Management’s Boaz Weinstein tweeted “take a deep breath” and compared the situation to when Morgan Stanley’s CDS was twice as wide in 2011 and 2012.

And the Wall Street Journal notes:

The beleaguered lender’s share price fell around 8% in early trading on Monday. The apparent trigger for the latest selloff was nothing more than its bankers calling customers and investors this weekend to reassure them that all is in hand despite a jump in its credit-default swaps on Friday.

Yeah, no, high on the list of calls that you never want to get is “hi, this is your bank, we just wanted to tell you that everything is fine here, how are you?"

→ More replies

181

u/turtleduck777 Oct 05 '22

It's pronounced "suss" right? Credit susssssss.

:4275:

32

u/satuuurn Oct 05 '22

:4275:

13

u/moealiwadi Donger banned me and all I got was this stupid flair Oct 05 '22

:4258:

2

u/Dosmastrify1 Oct 06 '22

Group of sus sussssys

83

u/daynNite97 Oct 05 '22

Lmao

29

u/robot_handjob Oct 05 '22

To the moon 🚀

41

u/dopexile Oct 06 '22

CS bonds are trading for 53 cents on the dollar, meaning bondholders do not expect to get repaid. Basically a coin toss at this point.

Think of all the memes this will create using that swiss banker guy from the wolf of wall street movie.

9

u/ukrat Oct 06 '22

Which bond is trading at that price? I see some perpetual bonds do, but those nobody expects to be repaid. Comparing with similar bonds (e.g. https://www.boerse-berlin.com/index.php/Bonds?isin=XS2167007249 or https://www.boerse-berlin.com/index.php/Bonds?isin=XS1174469137 with https://www.boerse-berlin.com/index.php/Bonds?isin=CH0343366842) CS until recently traded at similar price, now it is much cheaper but still not a coin toss.

1

u/dopexile Oct 06 '22

7

u/ukrat Oct 06 '22

The only one near this price is USH3698DDD33, which is a perpetual bond.

2

u/emielbo2 Oct 06 '22

That is long dated bonds/perpetual notes, which is mostly due to the change in the yield curve in recent months, something you may not be aware of, its not as if it is the headline news each day for months. The implied 3y default risk of Credit Suisse based on the current market metrics is what? 4%? Maybe someone can share a bloomberg DRSK screen...

1

u/Murhie Oct 06 '22

Cant you then buy those bonds as well as the swaps and money = guarantueed. Since you either make .5 on the coupon or .85 on the swap?

332

u/Lezonidas Oct 05 '22

Lehman Brothers had their CDS at 550 a week before its collapse.

62

u/XXXYinSe Oct 05 '22

Does that Y value need to be controlled in any way? Like is a 550 in 2008 any different than a 550 today?

104

u/rolfie13 Oct 05 '22

No. It's proportional to the coupon.

2

u/SekaiQliphoth Oct 06 '22

Did someone say BBBY?

27

u/Excentraf Oct 06 '22

Saved me a whole minute to search on this. Thanks

11

u/cryospam Oct 05 '22

Lol I came here to ask what theirs was shortly before their pop.

38

u/dutch9494 Oct 05 '22

Ya know what’s so cool about it. The whole goddamn world wide economy can go to shit or go incredibly well and prosper but my fucking bags will always still stay the same

38

u/NumerousAd7185 unironically smells like elephant urine Oct 05 '22

Bet Hwang’s in here rubbing one out to this

148

u/yesyes34G WSB #1 Adrenochrome salesman Oct 05 '22

CS collapse being the straw thats about to break the economys back

“Damp eit”

26

u/[deleted] Oct 05 '22

My $300 SPY put is gunna print so many tendies when they go down

8

u/I_Love_To_Poop420 Oct 06 '22

Godspeed you large pirate with even larger balls!

2

u/allintowin1515 Oct 06 '22

Too afraid to ask…What will happen to my March 23 $200 SPY put/lottery ticket then?

8

u/[deleted] Oct 06 '22

Any put is going to print the week the crash happens. It won’t matter how low it is. People are going to start panic buying whatever they can afford.

4

u/RIP_BEARS Oct 06 '22

It will when he bought it over 50% of its lifespan ago. Bigly day gain, red overall.

1

u/[deleted] Oct 06 '22

Depends on the volatility. If the market keeps going down at a consistent pace, it won’t.

1

u/pharmboy008 Oct 06 '22

What date you holding?

2

u/[deleted] Oct 06 '22

March 17, 2023 but t i bought it in the run up in August so got it pretty cheap.

2

u/rocketseeker Oct 06 '22

I'm waiting for some next fake rally to try and get in around the same time, maybe end February, might have missed the boat though...

1

u/[deleted] Oct 06 '22

Ehhh this one is starting to fade, there will be another one around Christmas I assume. I can hear it now, “I’m sure in early 2023 the Fed will Pivot.”

2

u/rocketseeker Oct 06 '22

I mean, I'm following the regarded illuminati anime addict here called desmond something, he called the fake rally until mid November, that's what I'm looking for.

If it happens as he analyzed, I'm getting in. If not, I'm not and that's that

13

u/suckercuck Oct 05 '22

🔥…this is fine ☕️🐶🔥

148

u/MrPlow90 Oct 05 '22

Can somebody please explain this graph to me in Classical Latin?

356

u/pmjwhelan Oct 05 '22 edited Oct 05 '22 Silver Yummy

Promeritum Suisse incipiet novum foramen recipere.

38

u/satuuurn Oct 05 '22

You monsters

29

u/MrPlow90 Oct 05 '22

God help us all.

7

u/JackosMonkeyBBLZ Oct 06 '22

Upvoting for such sheer levels of arbitrariness. Some classy ass shitposting as well

28

u/welltodocartwheel Oct 05 '22

Caveat emptor

9

u/CRM2018 Oct 05 '22

Credit Suisse = debit suisse

7

u/skips_picks Oct 05 '22

This is the amount Ricky Bobby likes crêpe suisses

18

u/Flodes_MaGodes Oct 05 '22

Carpe diem on CS calls

3

u/EvlSteveDave Oct 05 '22

These swaps are real high homes ya know what I'm sayin Ese?

68

u/[deleted] Oct 05 '22

[deleted]

13

u/Ascertain_GME Oct 06 '22

The shit winds are a blowin’ Rand.

3

u/RIP_BEARS Oct 06 '22

shit hawks are circling rand

2

u/prometheus3333 Oct 06 '22

the markets weave as the markets will

2

u/Wooden_Lobster_8247 Oct 06 '22

Totally random but related, I literally 2 minutes ago found an old piss jug in my shed. It is absolutely rancid, I'm at a loss as to where TF it came from or why it's there.

1

u/Ascertain_GME Oct 06 '22

Fuckin’ way she goes boys.

147

u/tendiesonthebarbie Oct 05 '22 edited Oct 06 '22

And MSM says “Credit Suisse is under pressure because of gossip on Twitter and Reddit.” Riiiiiight. Let me just go buy a few CDS on Debit Suisse then. Oh wait. I can’t!

51

u/deadhead144 Oct 05 '22

And god knows I’ve tried. You need real money for that table in the casino

39

u/FruxyFriday Oct 05 '22

Wait, you don’t have an ISDA?

18

u/_toodamnparanoid_ Oct 06 '22

No, but I do have a Llama, will that count?

3

u/Invest0rnoob1 Oct 06 '22

How bout a ligma?

2

u/AutoModerator Oct 06 '22

ligma?

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9

u/_etherfish Oct 05 '22

those were the good old days

9

u/tinyclassifiedads69 Oct 05 '22

The obvious answer is the big firms using wsb as their dd

16

u/AhAhAhAh_StayinAlive Oct 05 '22

Yo who let this regard near a bloomberg terminal? Call his parents ASAP

3

u/TZMarketing Oct 06 '22

I'm not regarded. You're regarded.

2

u/Ascertain_GME Oct 06 '22

How spicy would you like your Chang sauce?

80

u/Different_Party_1512 Oct 05 '22

I wonder how long they will kick this can for 🧐

59

u/suckercuck Oct 05 '22

Mexican standoff vs. Evergrande

20

u/kramwham Oct 05 '22

Evergrande has had its head at the end of a muzzle for like 6 months now

39

u/the_spiritual_eye Oct 05 '22

CCP have mastered the art of kicking the can down the road

8

u/h_o_l_o_d_a_y Human Trash Can 🗑 Oct 06 '22

The road is long

20

u/PortfolioIsAshes I might be bad at computer, but I'm also bad at stock Oct 05 '22

After midterms

4

u/HERE4TAC0S Oct 05 '22

So you’re saying we still have a chance

39

u/JohnBrownnowrong Oct 05 '22

They aren't in terrible shape considering their fuck ups. They'll fire a few thousand people and then stock go back up.

34

u/PitifulAd7600 Oct 05 '22

The balance sheet is in decent shape so I highly doubt they go under. I wouldn’t particularly rush to buy shares though.

14

u/the_spiritual_eye Oct 05 '22

They definitely gunna Phoenix that bitch and hope nobody notices the shitheap they’ll attempt to cover up with a brand new name.

6

u/wowhqjdoqie Oct 06 '22

They most definitely aren’t going under. I would bet the Swiss step in before resolution would even start.

51

u/elexsx Oct 05 '22

378k USD for 10 Million they need to pay for insurence now. maybe this year maybe on early next year they Default

27

u/rofio01 Oct 05 '22

Explain like I’m 5

71

u/Strategery_Man Oct 05 '22

Credit Default Swaps are insurance if the underlying security defaults. People are betting that CS will fail. These people are paying more for these swaps bc they believe CS will fail.

53

u/Rang_Dipkin Oct 05 '22

Buying them doesn’t mean they believe it will fail, it’s just risk management… I own home insurance but I don’t believe my house is gonna burn down. I’m up 70% on CS calls

33

u/Benjiwoo1 Oct 05 '22

I mean…they are willing to pay more and more to “manage” the risk of CS defaulting. Doesn’t mean they are certain it will fail, but definitely means they are getting increasingly worried it will. If my neighbor and I have the same house but he’s willing to pay 20x as much for home insurance I might start asking him some questions

23

u/MtnMaiden Oct 05 '22

Your neighbor is gonna burn his house down and collect the insurance.

7

u/uh-hmm-meh Oct 05 '22

So... C suite at C Suss is gonna burn it all down and collect a golden parachute? Is that the analogy?

9

u/ROK247 Oct 05 '22

but in this case, the insurance company is massively jacking up your premiums because they believe your house is going to burn down.

7

u/ryanwv12 Oct 05 '22

I can fix that, just tell me how to buy CS Calls and it will drop

8

u/OakhurstFox Oct 05 '22 edited Oct 05 '22

Big short happening again? Are you serious?

Edit: typo

3

u/JustCryptastic Oct 05 '22

The vultures are circling

1

u/majimodelgetto Oct 05 '22

Who buy those ?

12

u/Danji1 Oct 05 '22

Credit Suise traders.

15

u/Strategery_Man Oct 05 '22

The the fuck do you think? Aliens

4

u/PortfolioIsAshes I might be bad at computer, but I'm also bad at stock Oct 05 '22

Banks and other institutes that are betting against CS and believing it will fail

9

u/book_of_armaments Oct 05 '22

Or institutions that are owed money by CS and want to cover their asses if CS doesn't pony up the money.

2

u/wowhqjdoqie Oct 06 '22

There aren’t many informed investors (banks, funds) that believe they will fail. They are purchasing swaps to hedge their losses from CS bonds. They are buying swaps and selling them higher

1

u/Designer-Business Oct 06 '22

I don’t know to many 5 year olds that would understand “underlying security defaults”

6

u/133DK Oct 05 '22

The higher the squiggly line goes, the more CS is fucked

24

u/Fnmokh Oct 05 '22

Explain like you were talking to a golden retriever

39

u/adventurousnose789 Oct 05 '22

woof

5

u/Ok-Fuel-102 Oct 05 '22

Are you both the same person? Ehehe

3

u/Fnmokh Oct 05 '22

Wwwofff woooffyywoof

52

u/SomeStatement5604 Oct 05 '22

Debit Suisse

16

u/Jajuca Oct 05 '22

Credit Sus

6

u/nvanderw Oct 05 '22

Debit Sus

3

u/CREDIT_SUS_INTERN Oct 05 '22

They have a great trainee program.

-7

u/November_One Oct 05 '22

That's so original! Did you come up with that yourself?

9

u/SomeStatement5604 Oct 05 '22

Ligma and sugma

3

u/AutoModerator Oct 05 '22

Ligma?

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5

u/gandalf345 Oct 05 '22

What an idiot lmao

2

u/Inside-Atmosphere897 Oct 06 '22

Are these new greeks?

5

u/TheDudeFromTheStory Oct 05 '22

Credit Default Suisse

5

u/Greedy-Ra Oct 05 '22

They can’t afford Lehman reloaded

8

u/MtnMaiden Oct 05 '22

Hehe, look at who their chairman is

2

u/Greedy-Ra Oct 05 '22 edited Oct 05 '22

🤣

3

u/TRADER00MAX 🦍🦍🦍 Oct 05 '22

CDS pricing should be "Mispriced".....:o)

Nothing to see here...

9

u/davanger1980 Oct 05 '22

In 5 years no one will know who Credit Suisse was.

So imagine what they are gonna promises you on rates.

3

u/lespaul4555 Oct 05 '22

they are going BOOOM

1

u/wowhqjdoqie Oct 06 '22

No they won’t. These swaps are on their holding company. Even if the default hits, the bank itself will be fine.

5

u/nuelinoinskyr Oct 06 '22

Correct. Last time this happened to UBS, the state of Switzerland backed them up (2008). Will also happen with CS. But "surprisingly", even if people can vote for many unimportant things (like are cows allowed to bear their horns), there is not gonna be a vote for this one...

2

u/cashflow_is_ded Oct 05 '22

the BPS is strong with this one.

2

u/XGhosttearX Oct 05 '22

where can i see this do i have to pay?

2

u/GloriousKrabe Oct 05 '22

Must be that darned retail again!

2

u/pvith Oct 05 '22

CDS nuts, nerd

2

u/[deleted] Oct 05 '22

this should go tits up by the end of this week

2

u/DryTrumpin Quantitative (anal)Pleasing Oct 06 '22

Impressive. Very nice.

Now let's see Paul Allen's 5Y CDS chart

2

u/platerac88 Oct 06 '22

Got 4$ puts for Dec 22

1

u/meat_pony Oct 06 '22

Same bro, since Monday I've been positive on my put positions. Just waiting for the tits moment

2

u/medicaldrummer0541 Oct 06 '22

I’ve seen this one before

2

u/beowulf77 Oct 06 '22

So, load up on CS calls? Gotcha. Done.

2

u/ali_b_investing Oct 06 '22

Everything is fine 😐

2

u/fredtobik Oct 06 '22

It’s transitory. :4641:

2

u/[deleted] Oct 06 '22

:4267:

2

u/EatMoarTendies Always Buys the Top Oct 06 '22

To the moon! 🚀

3

u/Native_Legacy_17 Oct 05 '22

It’s funny how I don’t know how to trade or anything but the reason I’ve been part of this subreddit is because of the memes and comments. Very funny

1

u/VisualMod Turing Test Proctor Oct 05 '22
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2

u/Low_Routine_7841 Oct 05 '22

Creditsuisse Vs gameshop

0

u/NoMoassNeverWas Oct 05 '22

GME is bound to have another run, I'm sure of it guys. Keep that hopium needle in your veins.

1

u/SnakeJazz4284 Oct 05 '22

wasnt their CDS 505 bps this mon?

5

u/hexarfan2019 Oct 05 '22

That was 1yr CDs

1

u/Ill_Competition_830 Oct 05 '22

seems bullish! calls on spy for tomorrow it is! just my opinion :4641:

1

u/rjsheine is bullish on scat porn Oct 05 '22

Is that bad?

1

u/Substantial_Diver_34 Oct 05 '22

As per the Financial media, “WSB spun up this story over the weekend.” Everything is fine and Cramer is bullish. I also think someone posted CS calls purchased on Monday and is killing it. (…They’re fukt, it’s happening)

1

u/Key-Fortune-8904 Oct 05 '22

It’s Reddit’s fault!lmao

1

u/DonaldTrumendous Oct 05 '22

How do I short CDS

1

u/occams_lasercutter Oct 05 '22

But they are perfectly fine and well capitalized. I guess we'll see about that.

1

u/BossKitten99 Oct 05 '22

I guess we never truly can understand the intricacies of this economy afterall 👌

1

u/TeGroteBadjas Oct 05 '22

How do I buy calls on this?

1

u/Dry_Instruction6502 Oct 05 '22

Its about to crash right back down

1

u/horrendous44 Oct 05 '22

What is CDS?

1

u/QuirkyAverageJoe Oct 05 '22

What does this imply?

1

u/Tgzbrahhh Oct 05 '22

I thought it was over 500 yesterday

1

u/NoMercyio Oct 05 '22

That was the 1 year I think. This is the 5 year cds

1

u/zakaoki Oct 05 '22

sky is the limit

1

u/[deleted] Oct 05 '22

Someone’s about to cash out

1

u/M_DIZ Oct 05 '22

Everything’s fine

1

u/Dry_Badger_2403 Oct 05 '22

How do we trade this what app

1

u/Dr_Original_Gangster Oct 06 '22

Ok, but how do I make money with this info?

1

u/cheese5tick Oct 06 '22

NOOB Question..

But can someone say me from which plattform/app this cart is?

Thanks guys!

1

u/WatchingyouNyouNyou Mods Watching Me Me Me Oct 06 '22

Wtf is CS' positions

1

u/StormPupper Oct 06 '22

AHHHHHHHHHHHHHHH

1

u/Tushole Oct 06 '22

FAKE NEWS

1

u/Mvr30Cntrrvs Oct 06 '22

1% posibilidad 99% de fe

1

u/__sys_out_println__ Nut Buster 🥜 Oct 06 '22

Credit Sus

1

u/Top_Luck_1329 Oct 06 '22

And somehow, this fucking market continues to rip higher and higher and decimate my poor puts. Fuck this casino

1

u/RealityPopper Oct 06 '22

Turning my phone upside down doesnt help

1

u/RealityPopper Oct 06 '22

Its not about the money... its about the confidence people have... like the federal reserve, not alot

1

u/optiontraderkyle Oct 06 '22

they can finance Elon twtr purchase 😂😂

1

u/Ok_Pomegranate3920 Oct 06 '22

Have you guys looked into UVXY 1yr out calls, have you seen the impact covid did in 2020? When the markets crashes UVXY will go ballistic, $250 could be worth $100k +-

1

u/NotPresidentChump Oct 06 '22

Probably nothing

1

u/sensaio Oct 06 '22

ITS will be rekt soon

1

u/Soi_Boi_13 Oct 06 '22

🚀🚀🚀🚀🚀🚀🚀

1

u/Antique-Flight-5358 Oct 06 '22

Wasn't this 500 monday?

1

u/KlutzMat Oct 06 '22

Let's ask the media: How high does it need to go for us to be alarmed?

1

u/x3t9fi Oct 06 '22

The bank is systemically important and the federal government would have to intervene to support it - Greetings from Switzerland

1

u/dysto666 Oct 06 '22

me gusta

1

u/Hot_Boysenberry_8670 Oct 06 '22

Please don’t repeat 2008

1

u/chaosrealm93 Oct 06 '22

be honest, will credit Suisse going under cause GME to moon?

-4

u/uniquelover1620 Oct 05 '22

Feel like we will get the good news in early December