The category of high yield bonds counts both corporate and bank bonds, including the AT1 bonds that Credit Suisse will have to write down to zero on the orders of the Swiss regulator as part of the bank's rescue merger with UBS . Danske Bank's chief strategist Frank Oland said in a note published on Monday that the lender's decision was driven by an increasing risk that yields on high yield bonds could rise quite significantly, resulting in substantial capital losses. "We are seeing a tightening of credit conditions, both before all this with Silicon Valley Bank, but probably reinforced by what has now happened," Oland said.
"When we have the kind of turmoil where many customers are withdrawing some deposits from the banks, we can expect credit conditions to be tightened further, meaning that lending will be cut back, and interest rates will perhaps also be raised," he added. (Reporting by Louise Breusch Rasmussen Editing by Jacob Gronholt-Pedersen and Mark Potter)