what to know about the crisis and the rescue – Corriere.it

What consequences can there be on the bond and stock markets after the story of the cancellation of the subordinated bonds of Credit Suisse?
The keyword: volatility. In the early part of the day on Monday 20 March, after the announcement, not only the prices of Tier1 bonds (a market worth 275 billion dollars) fell, but also the shares of banks. At the end of the day, however, the shares of credit institutions recovered ground, dragging the lists. It could also happen in the future. Waves, jolts. Then they come back.

When do they make the titles subordinated?
Much more than the others, because they are decidedly riskier. Here are some numbers. Two weeks ago a Tier1 issue repayable in five years yielded 5% more than a government bond of the same maturity. Last Friday the distance had widened to 6.8%, on Monday 20 March it fluctuated between 8.5% and 12%. With capital account losses quantifiable between 9 and 11%. It is no coincidence that today classic bonds, including BTPs, have been a pilgrimage destination (fly to qualityoperators say). Because when things go wrong, solidity is sought, perhaps favoring the German Bunds. But with rates on the rise and inflation at 8-9% our government bonds, which have higher yields, also benefited in part.

How does the repayment hierarchy work in the event of a bank bailout of an institution supervised by the ECB?
There is a sort of pyramid, which starts from the deposits, the most protected, and reaches risk capital. Bonds of the type canceled by Credit Suisse are right before stocks. Those who buy them (and this type of bond is almost never directly accessible to private savers) assumes a risk similar to the equity risk. That can lose everything in cases like these.