{"id":4539,"date":"2008-12-17T13:13:59","date_gmt":"2008-12-17T17:13:59","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=4539"},"modified":"2008-12-17T13:13:59","modified_gmt":"2008-12-17T17:13:59","slug":"deutsche-bank-ignores-sub-debt-pretend-maturity","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=4539","title":{"rendered":"Deutsche Bank Ignores Sub-Debt Pretend-Maturity"},"content":{"rendered":"

The Financial Post reports<\/a>:<\/p>\n

Deutsche Bank\u2019s decision to skip an opportunity to redeem \u20ac1-billion of subordinated bonds at the first scheduled call date because replacing them would be more expensive has rattled the bond market. Some suggested the European investment bank\u2019s move, which surprised both investors and experts, has transformed the subordinated debt market. They fear that other banks will follow, which could threaten their relationships with investors and trigger losses.
…<\/b>
Deutsche Bank is the first major bank not to call a Lower Tier 2 issue, which rank just below senior bonds. The move has implications for the wider subordinated debt market was well as for extension risk of Tier 1 securities, Mr. Adamson. said.<\/p><\/blockquote>\n

I, for one, am very happy with this move. As I wrote in A Vale of Tiers<\/a>:<\/p>\n

Investors tend to trade sub-debt as if it will definitely mature on their step-up date \u2013 dealer quotations will often reflect a spread to a Canada bond maturing on the step-up date. However, while one may count on them being called, as expected in good times, this will not necessarily be the case in times of trouble. In times of trouble, three-month BAs + 100bp might look awfully skimpy! Investors should tread very carefully when purchasing debt of this nature.<\/p><\/blockquote>\n

For years, pseudo-managers have been able to outperform actual bonds simply by purchasing sub-debt and Innovative Tier 1 Capital, justifying these moves on the grounds that the tiered structures are included in the Scotia (now DEX) index. The largest corporate holding in XBB<\/a>, for instance, is RBC Trust Subordinated Notes, with a pretend-maturity of 2012-4-30.<\/p>\n

Sub-Debt has been discussed on PrefBlog, particularly in the posts Cracks Appear in European Sub-Debt Market<\/a> and Banks and Subordinated Debt<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Financial Post reports: Deutsche Bank\u2019s decision to skip an opportunity to redeem \u20ac1-billion of subordinated bonds at the first scheduled call date because replacing them would be more expensive has rattled the bond market. …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-4539","post","type-post","status-publish","format-standard","hentry","category-banking-crisis-2008"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/4539","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4539"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/4539\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4539"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4539"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4539"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}