World economy talk

[uls]

forced into a marriage with someone who has issues, the groom asked the gov't for insurance in case the bride's issues come back

The Swiss government has also responded favorably to a request from UBS for a financial guarantee in the event that Credit Suisse's legal problems return in the form of fines or lawsuits. It will provide a $9 billion backstop to the bank for the risks it is undertaking.

"In order to reduce any risks for UBS, the federal government is also granting UBS a guarantee in the amount of CHF 9 billion to assume potential losses arising from certain assets that UBS takes over as part of the transaction, should any future losses exceed a certain threshold," it said in a press release.

[Monseratto]

So the Credit Suisse depositors get their money back... but not the AT1 bond holders. And many other banks AT1 bonds are affected... Like HSBC and Standard Chartered.

Credit Suisse’s $17B of risky bonds now worthless after takeover by UBS: ‘Those bonds were created for moments like this’ | Fortune

HSBC Slumps in Hong Kong as AT1 Debt Selloff Weighs on Banks

HSBC Holdings Plc shares closed 6.2% lower, the biggest drop in nearly six months, with its newly issued AT1 bond dropping by more than 5 cents. Standard Chartered Plc ended the session down 7.3%. The broader Hang Seng Index slid 2.7%.

The complete write-down of Credit Suisse’s AT1 debt as part of a Swiss bailout has investors in the $275 billion market scrambling to determine how much protection the notes offer in a crisis. The repercussions can be twofold, with banks such as HSBC potentially needing to find new sources of capital if there’s a loss of confidence while their holdings of such debt issued by peers may see a significant loss of value.

In a sign of contagion, some Asian banks’ AT1 bonds, which are deemed as the riskiest bank securities, fell by a record. Bank of East Asia Ltd.’s 5.825% perpetual dollar note slumped 8.6 cents to 79.7 cents, which would be a record decline if maintained through the end of Monday’s trading, according to data compiled by Bloomberg.

Additional Tier 1 notes were created after the Global Financial Crisis to ensure that losses in times of crises would be borne by investors, rather than taxpayers bailing out borrowers.

“The Credit Suisse deal has left some bondholders with significant losses and investors in the region may be reexamining exposure to financial market turmoil and tail risks,” said Marvin Chen, analyst at Bloomberg Intelligence.

[Monseratto]

Why $17 Billion in Credit Suisse ‘CoCos’ or AT1s Got Wiped Out in UBS Takeover

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bondholders are supposed to be senior to shareholders

but credit suisse coco bondholders got wiped out while shareholders still got something (UBS shares)

bondholders are angry

This has provoked a furious response from some of the AT1 bond holders as it has not accounted for the seniority of CoCos over the lender’s shares in the capital structure. This is a big problem for a market that would expect bond holders to be paid before shareholders.

this is gonna be problematic

The decision to ignore market convention – that shareholders are the first to take a hit before AT1 bonds face losses – could prove to be a huge blow to the US$275 billion AT1 market and raises serious doubts about the prospects for other lenders’ CoCos.

[Monseratto]

US raises rates to 5.0%... US stock markets went up.

But Yellen said no "blanket insurance" for all US bank deposits... US stock market went south.


Yellen says not considering '''blanket insurance''' for all U.S. bank deposits | Reuters


Bank shares slide as Janet Yellen plays down ‘blanket’ deposit guarantee

The KBW Bank index, which tracks shares in 24 large and midsize banks, dropped almost 5 per cent, reversing all the gains it made after Yellen’s comments at the bankers’ association on Tuesday.

The decline weighed on the broader S&P 500, with banks making up seven of the 10 worst performers on the benchmark index. First Republic led the declines, dropping 15 per cent. Comerica, M&T Bank and US Bancorp each fell more than 7 per cent.

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last night the Fed raised 25 bps but it felt like a 50 bps hike

why?

banking system problems could cause banks to reduce lending

pulback in bank lending will slow down the economy -- that's equivalent to another 25 bps hike

that's why stocks fell (aside from Yellen's no blanket insurance on bank deposits)

[Ry_Tower]

Iran-Saudi Pact Is Brokered by China, Leaving U.S. on Sidelines - The New York Times

Not much news here but this ia significant in a lot of ways. Hopefully it is for the better.

Sent using Tsikot Forums mobile app

[Monseratto]

Hindenburg takes aim at Dorsey'''s payments firm Block, shares plunge | Reuters

Hindenburg Research on Thursday disclosed short positions in Block Inc (SQ.N) and alleged that the payments firm led by Twitter co-founder Jack Dorsey overstated its user numbers and understated its customer acquisition costs.

Block vowed to fight back, saying it would explore legal action against the short seller for its "factually inaccurate and misleading report" that was "designed to deceive and confuse investors".

"Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price," the payments firm said, adding that it would work with the U.S. Securities and Exchange Commission.

Block's shares were last down 15% at $61.67, paring some losses after a 22% plunge earlier.

Hindenburg, which was behind a market rout of over $100 billion in India's Adani Group, said in its report that former Block employees estimated that 40% to 75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.

[uls]

the cost of bond insurance in case Deutsche Bank defaults

(cds = credit default swap)




DB is under attack today

[Athrunzala]

Biden Says US Banks Are in 'Pretty Good Shape'