German Bonds Surge as Credit Suisse Troubles Force Hunt for Havens

Swiss Bank Credit Suisse has endured a rocky few months as it tries to return to profitability through a complex restructure that will see it drop its investment banking unit while focusing on its key wealth management business. However, this has failed to convince investors and has not stopped client outflows. Additionally, following the collapse of Silicon Valley Bank in the US, investors are on the lookout for safe havens.

Credit Suisse Group AG’s top shareholder ruled out providing more assistance to the embattled bank, causing the bank’s share price to slide more than 20% after major shareholder Saudi National Bank Chairman Ammar Al Khudairy said he will not throw a lifeline to the Swiss lender. 

These comments helped drag all European banks lower as investors shied away from risk after the turmoil of the past week. The euro plunged as much as 1.1% to $1.0620. Meanwhile the Japanese yen, typically a safe haven currency, outperformed other Group-of-10 currencies.

German bonds were also the beneficiary of the clamor for safe havens after the collapse of Silicon Valley Bank and the Credit Suisse troubles were expected to force policymakers to raise borrowing costs less than previously anticipated.

The yield on two-year German debt, normally the most sensitive to changes in interest rates, tumbled more than 40 basis points, putting them on course for the largest one-day price surge on record, surpassing levels seen during the global financial crisis in 2008.