Credit Suisse's debt outperforms equity after central bank edict

Friday, June 15, 2012

Credit Suisse credit spreads have edged tighter today, moving in the opposite direction to the bank?s equity, after the Swiss central bank yesterday said that the bank should move to strengthen its balance sheet. The central bank suggested several measures Credit Suisse could employ to achieve this aim, including stopping payment of dividends or selling more shares. Such moves would typically be seen as being positive for debt investors at the expense of equity investors.

Credit Suisse?s senior five-year CDS spread has tightened by one basis point to 194bp in early trading this morning after being largely flat yesterday according to data from Markit. The relative stability of credit spreads is in sharp contrast to the bank's equity, which plunged 10% yesterday on news of the Swiss central bank's suggestions. ?

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