Hedge Funds Drive Credit Suisse CDS Higher on Bets of a Payout

An illiquid corner of swaps insuring Credit Suisse Group AG debt surged back to life this week as some hedge funds make the case they should be triggered.

Funds including FourSixThree Capital and Diameter Capital Partners have been buying swaps insuring Credit Suisse’s subordinated bonds with the idea that the controversial writedown of the firm’s AT1 securities could prompt a potential payout of the derivative contracts, according to people familiar with the matter.

While the five-year credit default swaps dipped on Thursday, they’re up more than 80 basis points this week to about 360, according to CMAI prices. That’s the ...