Credit Suisse shares jump 7% after the embattled bank launches a $3 billion bond-buyback program

• Credit Suisse shares rallied 7% and the cost of its insuring its debt dropped Friday.
• Investors welcomed the Swiss bank's plan to buy back about $3 billion worth of bonds.

Credit Suisse's stock price climbed over 7% on Friday, and the cost of insuring the bank's debt dropped, as anxious investors welcomed the news it will buy back $3 billion worth of bonds.

The Swiss lender said Friday it will spend up to $2 billion repurchasing parts of 12 dollar-denominated bonds, and use another 1 billion euros (almost $1 billion) to buy back parts of eight euro and sterling bonds.

As well as boosting the Swiss investment bank's shares, the news sent its five-year credit default swaps (CDS) down 42 basis points to 308 basis points, Reuters said.

"The transactions are consistent with our proactive approach to managing our overall liability composition and optimizing interest expense and allow us to take advantage of market conditions to repurchase debt at attractive prices," the bank said in a statement.

Credit Suisse stock rose 8.3% Friday on the Swiss Exchange in Zurich. Meanwhile, its US-listed shares gained 7% in premarket trading.

On Monday, the bank's stock plunged to a record low, while its CDS surged to an all-time high. The fall was sparked by last Friday's memo from Credit Suisse's CEO, who said it was a "critical moment" for the company ahead of the unveiling of its restructuring plans on October 27.

Jittery investors — spooked by stubborn inflation, rising interest rates, and a raft of global economic risks — reacted by dumping the bank's stock, and hiking the cost of protecting against a default.

The backlash likely reflected concerns about a string of recent scandals and costly mistakes at Credit Suisse, along with fears that liquidity issues were driving its plans to potentially sell assets and issue shares.

"It's concerning when a bank in market conditions like this says that they're restructuring, they're going to sell assets, they're going to raise capital," Sheila Bair, the former chair of the Federal Deposit Insurance Corporation (FDIC), told Fox Business this week.

Bair also flagged the risk of a major bank collapsing and endangering the global financial system. "It was AIG last time, let's hope it's not Credit Suisse this time," she said.

Credit Suisse may well be repurchasing $3 billion of bonds to reassure investors it remains in rude financial health. The program promises to save it some money, as it's buying back its debt at a discount, and it will owe fewer interest payments to its bondholders.

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