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Credit Suisse default insurance cost hits all-time high as contagion fears spread

Credit Suisse default insurance cost hits all-time high as contagion fears spread
Ana Zirojevic

After three banking giants, Silvergate Bank, Silicon Valley Bank (SVB), and Signature Bank, all crashed within days of each other, the cost of insuring the bonds of Credit Suisse against the lender defaulting reached the highest level since its existence as fears are mounting of the contagion spreading further.

Specifically, five-year credit default swaps for the Zurich-based bank have soared to 446 basis points amid SVB fallout, as observed by Holger Zschäpitz, finance analyst, author, and senior business editor at the German daily newspaper Die Welt on March 13.

Cost of insuring against Credit Suisse default. Source: Holger Zschäpitz

Troubles for Credit Suisse

According to Bloomberg, these costs “widened the most in a Bloomberg index that tracks the [credit default swaps (CDS)] of 125 European high-grade companies,” while the bank is also struggling with an exodus of staff across departments in Singapore and Hong Kong since September.

It is also worth noting that back in October, Credit Suisse’s default swaps were seen skyrocketing as well, indicating a systemic risk in the European Union (EU) banking sector suggested by the lender’s alleged connections to the United States financial system.

It should also be noted that bleak predictions about Credit Suisse’s future started several days ago after the bank announced a delay in delivering its annual report after the call from the U.S. Securities and Exchange Commission (SEC) regarding its cash flow statements for 2019 and 2022. Soon after, Credit Suisse shares hit an all-time low.

At press time, the Credit Suisse stock was seen changing hands at the price of 2.21 CHF (about $2.44), having dived more than 11% in the last 24 hours, adding up to the cumulative loss of nearly 20% across the previous five days, as per the latest data retrieved on March 13.

Credit Suisse 24-hour stock price chart. Source: Google Finance

Interestingly, Robert Kiyosaki, the author of the best-selling personal finance book ‘Rich Dad Poor Dad,’ had warned that a third bank was likely to follow SVB and Silvergate, shortly before the news broke that the New York-based Signature Bank had collapsed as well, as earlier reported by Finbold.

As a reminder, the author has long been projecting a broader economic collapse and a “rough landing” for the world, urging his followers to buy Bitcoin (BTC), gold, and silver as alternatives to the USD, which he called “fake money” that will contribute to the “end of the American Empire” as well as “invade sick economy” as the bailouts begin.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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