Banks

Over the course of last week, we saw several headlines around Additional Tier 1s (AT1s). First, the Dutch Finance Ministry indicated it is exploring the possibility of modifying or abolishing the asset class.

Yesterday’s US CPI report delivered a few interesting numbers but is still consistent with the Fed’s goals and timelines, which should allow it to cut rates in the context of some sort of a soft landing.

We have had a busy week on the central bank front with the Federal Reserve chair Jerome Powell’s semi-annual testimony to congress on Wednesday before Christine Lagarde took centre stage at the European Central Bank press conference yesterday. 

NN Group, the Dutch insurer, has issued its inaugural €750m Restricted Tier 1 (RT1) deal, which came with a 6.375% coupon and BBB-/BBB rating from S&P/Fitch.

Almost a year ago to the day, we were in the midst of banking sector turmoil, which started off with regional banks in the US and spilled over to Europe, eventually culminating in the forced merger between Swiss banks UBS and Credit Suisse.  

Last week's data deluge from the UK painted a mixed picture for the economy, offering insights into inflation, growth, and the possible path for interest rates.

Income has returned. After a couple of barren years, yields in high-quality bonds that were not too long ago returning just 2% or 3% are now set to bring in 7% to 8%. And this jump in yields looks to be a game changer for investors.

In this Back to Basics webinar, Aza Teeuwen (Partner, Portfolio Management) and Douglas Charleston, (Partner, Portfolio Management) provided a comprehensive understanding of the key aspects and trends within the European RMBS market.

A few weeks ago, JP Morgan skipped a call on one of its $1,000 par preference shares (“US Prefs”). The perpetual notes had a coupon of 6.75% payable until Jan’24, with a subsequent reset of 3-month SOFR + 404bps. Post the non-call, the coupon changed to 9.35% and will continue to reset every 3 months.

Yesterday was an eventful day for markets. We started off with inflation data in Europe, followed by an earnings release by New York Community Bank that showed large provisions in their commercial real estate loan book, before moving onto the Fed’s Federal Open Market Committee meeting

Low interest rates feel like a lifetime ago, but it was only in June 2022 that the Bank of England increased the base rate to 1.25%, the first time it moved above 0.75% since March 2009.

Dillon Lancaster provides an update on the recent events which occurred during Q4 2023, highlighting the volatility in the treasury market which dominated the beginning of the fourth quarter, and the turnaround in November, which saw US inflation fall below expectations and labour data weaken.