Special: Is another financial crisis inevitable?
Word on the Street
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The UBS Merger and Credit Suisse's T1 Capital
The UBS merger will trigger a complete write down of credit Suisse's USD denominated US dollar denominated 81 bonds, effectively subordinating 81 bondholders to equity. This in itself is causing a bit of uproar amongst credit investors as I'm sure you can imagine. It also represents the largest ever loss inflicted to 81 investors since the birth of the asset class both during and after the last financial crisis. But it's certainly becoming harder to assess what risk you are really getting into with that extra yield pickup implicit in 81. And that may create some unwanted waves as we're seeing this morning.
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