As investors rushed to reprice the riskiness of bank debt after the Credit Suisse news highlighted the risks of investing in these securities, European bond prices and stocks fell
As European markets opened on Tuesday, HSBC Holding’s 6 per cent AT1 bond seemed to recover slightly to 93 cents a dollar, after losing more than 5 points in the previous session.The selling extended to Asian banks, with Singapore bank UOB Group’s 3.875 per cent bond down 2 points at 95 cents to the dollar, and Thai bank Kasikornbank’s 4 per cent also down 4 points to 80 cents to a dollar.
Banking supervisors in the U.K. and eurozone tried to stop a rout in the market for convertible bank bonds, by stressing owners of such junior bank debt would only suffer losses after shareholders have been wiped out – unlike at Credit Suisse, whose main regulators are in Switzerland.“If I had asked everyone a week ago they would have said this could never happen,” said Jefferies banking analyst Brian Johnson in Sydney. “This remains a significant breakdown in how the credit stack works.
A London-listed exchange-traded fund which tracks banks’ AT1 debt tumbled as much as 18 per cent on Monday before rebounding, and is still down 17 per cent in two weeks.
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