If the emergency takeover of Credit Suisse by UBS was supposed to calm markets, it is not looking that way this morning. Markets are sharply down in Asia, and the FTSE fell by 1.5 per cent on opening this morning. Banks were the biggest fallers, losing up to 7 per cent of their value. There is a nasty realisation that the contagion from the banking crisis of the past week could have a lot further to spread.
This is a nasty shock to investors who thought that bond funds offered much greater security
The centre of this morning’s panic are things known as Additional Tier – or AT1 – bonds, about which we are going to hear a lot more in coming days and weeks. This is a class of bond introduced after the last banking crash in the hope of tempting more private capital to prop up the banking system. The
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