As Investors Fear Credit Suisse's Recovery, Both Bonds And Equities Decline

Monday witnessed a decrease in Credit Suisse bonds and a rise in the cost of insuring its debt against default, as the Swiss bank fought to reassure investors in the wake of a withdrawal of client cash and in anticipation of further litigation.

The second-largest bank in Switzerland announced last week that it was on course for a pre-tax loss of up to 1.58 billion Swiss francs ($1.58 billion) in the fourth quarter and that wealthy clients had made significant withdrawals.

This has resulted in a substantial decrease in liquidity, which exceeds various regulatory constraints.

In an official petition for a capital boost, the bank also stated that the U.S. Federal Reserve wished to probe Credit Suisse for the failure of the U.S. investment firm Archegos.

On Monday, investors were still digesting the news.

S&P Global (NYSE:SPGI) Market Intelligence reports that five-year credit default swaps rose 53 basis points (bps) to a record high of 398 bps since Friday's close. Credit Suisse began the year with a CDS of 57 basis points.

Extra dollar-denominated tier 1 notes fell more than 2 cents to their lowest level in recent weeks.

On Monday, the share price of the Swiss bank also hit an all-time low.

The decision of the Federal Reserve indicates that the bank may be vulnerable to additional punishment for its links to Archegos, whose collapse shocked Wall Street when its highly leveraged stock bets collapsed.

Credit Suisse was the greatest victim of a $10 billion slaughter, which was a double catastrophe for a bank already reeling from the failure of a key affiliate, Greensill Capital.

The objective of Credit Suisse's 4 billion franc capital increase is to help the bank recover from the greatest crisis in its 166-year history.