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Inside Credit Suisse’s downfall, bondholders cry foul over $17 billion wipeout and investors weigh the Federal Reserve’s next steps. — Krist [View in browser]( [Bloomberg]( Inside Credit Suisse’s downfall, bondholders cry foul over $17 billion wipeout and investors weigh the Federal Reserve’s next steps. — [Kristine Aquino]( Credit Suisse, UBS [UBS’s $3.3 billion deal to buy Credit Suisse]( comes with extensive guarantees and liquidity provisions, and is set to boost the value of its wealth and asset management invested assets to about $5 trillion. That said, UBS Chief Executive Officer Ralph Hamers has warned staff not to talk about business matters with counterparts, asking them to remember that “[Credit Suisse is still our competitor](.” Meanwhile, Credit Suisse has told its employees that promised [bonuses and pay increases will still be paid]( as the bank seeks to keep “business as usual.” There will be no changes to payroll arrangements and bonuses will still be paid on March 24, it said in an internal memo.  Bond wipeout [The holders of Credit Suisse’s riskiest bonds — worth $17 billion]( — are set to be wiped out, which could send the $275 billion market for bank funding into a tailspin. UBS’s purchase will preserve $3.3 billion of value for Credit Suisse’s equity investors, but that’s not supposed to be the pecking order, some holders in the bonds insist. “This just makes no sense,” said Patrik Kauffmann, a fixed-income portfolio manager at Aquila Asset Management, who holds the notes. Fed fallout Some central bank watchers say there’s a [strengthening case for the Fed to forgo an interest-rate hike this week]( as worries over the banking sector reverberate across markets. While investors still see a quarter-point rate increase as likely, the Fed’s coordination with five other central banks to boost liquidity in markets echoes back to previous crisis periods. “The fact that you are engaged in global coordination with other central banking authorities to rescue institutions and keep liquidity flowing, it just suggests that a pause is probably a better risk/reward,” said Julia Coronado, president of MacroPolicy Perspectives LLC and a former Fed economist. Caution eases S&P 500 and Nasdaq 100 futures were little changed as of 6:21 a.m. in New York. The Bloomberg Dollar Spot Index traded near its lows of the day, boosting the Japanese yen and British pound. Treasuries climbed across the curve, dragging UK and German bond markets higher. Gold reversed earlier gains and oil fell, while Bitcoin climbed for a fifth straight day. Coming up… At 11:30 a.m., the US will sell $57 billion of 13-week bills and $48 billion of 26-week securities. Earnings include Foot Locker. What we’ve been reading Here’s what caught our eye over the weekend: - [How Credit Suisse’s 166-year run ended]( with scandal and mistrust - Why [$17 billion of Credit Suisse’s riskiest debt]( got wiped out - US banks tread “bumpy path” as [First Republic’s troubles deepen]( - Apple is doing everything it can to [cut costs and avoid laying off workers]( - Banking stress will bring [“vicious” end to bear market](: Morgan Stanley - [The pound is among the few winners]( versus the dollar on a risk-off day - What does [Xi Jinping want from Vladimir Putin](? And finally, here’s what Joe’s interested in this morning Good morning. Here are four things on my mind today amid all that's going on: - One of my themes these days that I've written about a bunch is that so far the 2020s seem like a bizarre version of the 2010s. Take any trend from the post-Great Financial Crisis environment, and flip it 180, and there's a good chance that will help you understand right now. - Back then it was tech stocks leading the way. These days it's tech that's in a recession. - Back then the problem was too low employment. Today the problem is too high inflation. - Back then it was ZIRP. These days, not so much. Well over the last week, we got two more flips, specifically related to banks. This time the problem isn't "toxic", hard to value assets. The problem is ultra-safe Treasuries that took a big hit due to rates. In fact, arguably the problem isn't on the asset side of the balance sheet at all. Instead the issue is the deposit side. Everyone is worried about the flightiness of deposits at regional banks. So yeah, weird times.  - There's this recurring fantasy that you can do bailouts jut by zeroing out the equity holders, and keeping depositors intact. It sounds nice and just and tough. Protect the folks who didn't do anything wrong. Punish the risk takers. Capitalism. But as I wrote about last week in the US context, when you start wiping out some part of the capital stack at one bank, then investors in the same position at some other bank start to worry that they're next. To wit with Credit Suisse, as part of its weekend shotgun marriage to UBS, holders of its AT1/Contingent Convertible instruments [are getting totally wiped out](. Here's a good thread from the pseudonymous [Oscar D Torson on Twitter](, explaining how the wipeout works. Anyway, lots of banks have these instruments, which were introduced to provide more of a capital cushion after the last crisis. Now the holders of these instruments see they could be first in line to get wiped out if a similar "rescue" happens to their bank, so they're getting repriced. Here's one such instrument for the Spanish bank Unicaja Banco: Equivalent instruments even got [slammed in Asia over night](. Again the point is, if your plan is to zero out some part of the capital stack to keep money left over for depositors etc., then you hit that part of the capital stack at the next bank over.  - It's Fed week. Not long ago, we were talking about 50 bps. And maybe that will happen. But now it seems like there's a good chance of zero. And while this may not be ideal from the Fed's perspective, given that inflation is so high, the shock to the financial system is likely to have a disinflationary impulse in its own right. So it might make sense to pause. If inflation doesn't come down, the Fed can always hike harder down the road. Unbreaking the banks is a trickier task.  - Bitcoin. This is one of those circumstances where you gotta hand it to them. The digital currency didn't do very well during the inflation crisis. But now the question "will I be able to get the money that's in my bank account out?" is on people's minds, Satoshi's creation is doing phenomenally well. Here is a chart with Bitcoin (in white) and the Ethereum/Bitcoin ratio (in yellow). As you can see, not only is Bitcoin surging; Ethereum is falling behind in comparison. Ethereum is often a high-beta Bitcoin, but this is looking like a "flight to digital gold" for now. Bonus item: if you're in the mood for feeling more anxious about stuff, [check out our new Odd Lots episode on what's going on in commercial real estate](. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwart](. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. 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