- a couple of woke US banks got taken out
- Credit Suisse wobbled and got forced to merge with UBS
I am not well read about these events and so hesitate to draw these two events together. Maybe some of you can comment on that. This is related:
“When things go sour and trigger points are reached—such as a bank’s capital falling below certain levels relative to assets—the bonds convert to equity or are written down, cutting the bank’s debt and absorbing losses. In a post-collapse pecking order, at1 bondholders should come between senior bondholders, who have a right to payouts first, and stockholders, who in theory take first losses.
Credit Suisse has shaken the market for at1 bonds, now worth around $275bn, for two reasons. One is the size of the write-down, the biggest in the history of cocos by some way. The other is the fact that stockholders emerged above at1 bondholders in the pecking order. “
“the Fed has raised the rate on overnight-reverse-repo transactions from 0.05% in February 2022 to 4.55%, making it far more alluring than the going rate on bank deposits of 0.4%. The amount money-market funds parked at the Fed in the reverse-repo facility—and thus outside the banks—jumped by half a trillion dollars in the same period.” and the resulting headline “How the Federal Reserve drained the financial system of deposits”
The worry is that without sufficient deposits, US banks will be unable to fund themselves.
Someone at MB (I think), or maybe it was one of you, suggested that commerical property could be the next disaster waiting to happen thanks to higher rates and reduced demand due to people working from home.
This was reposted at zero, it mentions US commercial property and some other stuff:
“The take-away? In the midst of all the various credit crises, controlling inflation will be moved to the back burner. And the world will realize that the central banks are out of ammo, with no choice but to let their currencies burn.”
zero’s always alarmist but IMO bitcoin’s looking good, especially with a halving due next year.