Tuesday, 3 February 2009

Bloomberg Reports Interesting Development in Hybrid Bonds Market as Fears of Bank Nationalisations in the U.S. Mount

Click on this link to read a story by Bloomberg reporters Caroline Salas and Neil Unmack. Their conclusion is simply that government action (in the form of capitalisations) is failing to revive investor confidence in subordinated bank securities, which support the capital on their balance sheets. Hybrid bonds, or securities with characteristics of both debt and equity that banks have been using to prop up their capital and ''which typically count as regulatory capital to cushion against losses,´´ are key for lending. The drop in demand and prices for hybrid bonds, the reporters found, is curtailing new lending.

No comments:

Post a Comment