The crisis enveloping Credit Suisse Group AG showed few signs of easing Thursday as its bonds fell deeper into distress and the cost to insure against default rose to the highest level in over a year. The Swiss bank has been hit by the loss of billions of dollars tied to the collapse of Archegos Capital Management, as well as the suspension of funds linked to supply chain finance firm Greensill Capital.
Investor concerns over the crises within the financial industry are bleeding into a corner of the $4 trillion municipal-bond market that relies on banks to trade securities. A unit of Wall Street giant Goldman Sachs Group Inc. has stopped doing business with Credit Suisse Group AG's prime-brokerage unit on such bonds, according to people familiar with the matter.
Credit Suisse's bonds slid further on Thursday, leaving them firmly in distressed territory even after the beleaguered lender turned to the debt markets to help shore up its finances. The bank raised $2 billion from the sale of bonds that convert into shares, but even that move failed to calm investors.
Actively managed bond funds at Capital Group, a huge but intentionally faceless manager, have attracted $100 billion over five years, as investors seek the security of fixed income in a world of low interest rates. The manager's approach, which includes a decentralized system of more than 40 individual managers, has helped it avoid controversy.
Bond issued by First Republic Bank FRC, -13.40% were rallying on Thursday as details emerged of a $30 billion capital pledge to the bank by Blackstone BX, -0.78% and Carlyle Group CG, -1.00%. The investment firms will provide the bank with $20 billion in capital and purchase an additional $10 billion in First Republic stock.
Nouriel Roubini, a perennial prophet of financial doom, issues a fresh warning over bond portfolios as interest rates rise. Roubini warns that investors who are holding long-term bonds could face significant losses as interest rates rise, particularly if those bonds are trading at a premium.
How would an SDR bond work? Could such a bond issue help stretch the World Bank's and safely mobilize billions to fight poverty and finance sustainable development? SDR bonds could help mobilize needed resources, but they would need to be designed carefully.
US equity-index futures were steady on Friday and Treasuries gained, capping a tumultuous week for global markets amid fears of inflation and rising interest rates. The Dow Jones Industrial Average ended the day up 0.5%, while the S&P 500 and Nasdaq both closed up 0.6%.
Welcome to the Weekly Fix, the newsletter that's feeling 15 years younger all of a sudden. I'm Bloomberg's chief rates correspondent, and I'll be taking you through the week's most important news and analysis in the world of bonds.
In conclusion, Credit Suisse's bond crisis continues to worsen as the bank faces ongoing losses from the collapse of Archegos Capital Management and the suspension of funds linked to Greensill Capital. Investor concerns over the financial industry's crises are bleeding into the municipal-bond market, and even the sale of $2 billion in bonds failed to calm investors. However, some bond issuances, such as those from First Republic Bank, are rallying due to large capital pledges. As interest rates rise, investors holding long-term bonds could face significant losses, and the potential for SDR bonds to mobilize resources needs to be carefully considered.