Credit Suisse bonds reduce the debt of banks, financial companies -Dlight News

Credit Suisse bonds reduce the debt of banks, financial companies

Bonds issued by banks and financial institutions were under pressure on Wednesday as concerns over Credit Suisse rekindled concerns about a banking crisis. Credit Suisse US stock CS, -13.94% fell nearly 13.9% to $2.16 in trading on Wednesday, while its shares in Europe CSGN, -24.24% fell below the 2 franc level, the bank’s top shareholder, Saudi National Bank, told Bloomberg. It was not able to invest more capital in the bank. Saudi National Bank Chairman Ammar Al-Khudairi also told Reuters it was a regulatory issue, saying it could not exceed its 10% threshold. With Credit Suisse shares selling off, investors in its bank debt were also on edge. The 5% coupon debt issued by Credit Suisse in July 2027 was changing hands at an average price of 82 cents on the dollar, for a yield of about 10.3%, from a one-year low of 99.5%, yielding 5.2% and 99.5%, per MarketAccess. cents on the dollar. Bond yields and prices move in opposite directions. The backdrop for the Swiss bank’s convertible debt looked more grim, with its 9.75% coupon “co-co” bonds due June 2027 priced at an average price of about 36 cents on the dollar, according to MarketAccess. Wall Street widely considers bonds trading below 70 cents on the dollar distressed. Co-Co bonds, or contingent convertibles, have a strike price that can be converted into stock when triggered. A Credit Suisse spokesman declined to comment. US stocks traded sharply lower early on Wednesday, but settled at session lows after the Swiss National Bank issued a statement saying it would provide liquidity to Credit Suisse if needed. The bank’s liquidity capital ratio at the end of Q4 was 144%, “which is a strong ratio, and which has improved to an average of 150% during the quarter,” Credit Suisse CEO Ulrich Koerner said on Bloomberg TV on Tuesday. He also said that being a globally systemically important bank means it is held to higher standards when it comes to capital funding and liquidity than Silicon Valley banks require. Switzerland’s central bank also said on Wednesday that there were no signs of a direct risk of contagion for Swiss institutions from the turmoil in the US banking system. For big U.S. banks, JPMorgan Chase and Co., JPM, -4.72% Wells Fargo & Co. WFC, -3.29% and Bank of America Corp. Bonds issued by BAC, -0.94% were about 13 to 15 basis points wide. Spread basis, according to MarketAccess. Bonds issued by UBS Group UBS, -6.30% were about 22 basis points wider. Broader bond spreads signal that investors want higher returns, above risk-free benchmarks such as Treasury TMUBMUSD10Y, at 3.466%, to help offset market volatility or default risks. Shares of regional banks also remained under pressure after the collapse of Silicon Valley bank SIVB, -60.41% and New York’s Signature Bank SBNY, -22.87% , prompting regulators to backstop their bank deposits entirely. The Federal Reserve also opened an emergency lending facility to help banks meet any liquidity needs. Read: Why SVB’s ‘safe’ investments turn into a problem for securities banks The S&P 500 index fell 0.7% on Wednesday, while the Dow Jones Industrial Average DJIA, -0.87% fell 0.9% and the Nasdaq Composite Index COMP, +0.05% gained 0.1%. see: First Republic Bank downgraded to ‘junk’ by S&P and Fitch

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