Fraught investors keep pressure on global bank bonds By Reuters

SINGAPORE (Reuters) – Global bank stock and bond prices attempted to steady on Tuesday as regulators sought to convince investors that the hit embattled Swiss lender Credit Suisse bond holders are taking is an isolated event.

The turmoil in banks follows Credit Suisse’s rushed rescue merger deal on the weekend with UBS, during which Swiss regulators decided holders of 16 billion Swiss francs ($17 billion) of Credit Suisse’s Additional Tier 1 (AT1) debt will get nothing.

As investors rushed to reprice the riskiness of bank debt after the Credit Suisse news highlighted the risks of investing in these securities, European bond prices and stocks fell.

As European markets opened on Tuesday, HSBC Holding’s 6% AT1 bond seemed to recover slightly to 93 cents a dollar, after losing more than 5 points in the previous session.

European bank shares index fell more than 6% on Monday, before rebounding a bit.

The selling extended to Asian banks, with Singapore bank UOB Group’s 3.875% bond down 2 points at 95 cents to the dollar, and Thai bank Kasikornbank’s 4% also down 4 points to 80 cents to a dollar.

A senior fixed income trader for an asset manager in Asia said price swings were big and investors were struggling with executing trades.

“The liquidity issue is massive. We can’t do what we expect to do, which is a very complicated situation,” the trader said. “It’s only the second day of the week. Where it is going, I don’t know.”

Banking supervisors in the UK and eurozone tried to stop a rout in the market for convertible bank bonds, by stressing owners of such junior bank debt would only suffer losses after shareholders have been wiped out – unlike at Credit Suisse, whose main regulators are in Switzerland.

That didn’t really seem to assure investors.

“If I had asked everyone a week ago they would have said this could never happen,” said Jefferies banking analyst Brian Johnson in Sydney. “This remains a significant breakdown in how the credit stack works. ” 

Lawyers meanwhile are talking to a number of AT1 bond holders about possible legal action, law firm Quinn Emanuel Urquhart & Sullivan said on Monday.

Credit Suisse’s AT1 bond were marked down from 24 cents on Friday to 0.25 on Monday, and seemed stuck there on Tuesday.

UBS’s 4.375% AT1 bond was quoted at 60 cents, after it dropped heavily on Monday to 60 cents…