Hopes of calm vanish
Hopes for stabilisation in the market failed to materialise today as Credit Suisse shares slumped around 24% and European banking stocks faced renewed selling pressure, led by SocGen (-12%) and BNPP (-10%).
As a result, euro fixed income catapulted higher with Euribors gaining up to 50bps while the Bund rallied almost four points and the 10y yield declined by -30bps to 2.13%.
In euro vol, implieds soared again with the top left gaining as much as 25 normals although still shy of the 2022 highs above 200 annualised. “It’s not panic stations just yet,” felt one trader, “But obviously as we hit certain levels then certain strikes get hit and it starts to drive itself.”
Meanwhile, the latest headlines are not looking great with Bloomberg reporting that Credit Suisse asked the Swiss National Bank to make a statement of support following today’s share slump. Elsewhere WSJ has a story about liquidity problems facing UST and swaps amid speculation about a possible Fed, Treasury or G7 intervention. What will the ECB say or do?
Back in euro vol, one source reckoned there had been some de-risking towards the end of last week and in the run up to tomorrow’s meeting. “But it’s hard to de-risk when there are only a couple of gamma offers on the screen. So you do what you can and focus on the delta or trying to manage risks through other markets,” he said.