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The Royal Bank of Scotland Group plc Message Board

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  • rexobXIP rexobXIP Sep 4, 2009 9:44 AM Flag

    RBS prefs Vs regulatory pressure

    This thing appears overblown... read the more insightful Reuters article below.

    As I understand it there is no default whatsoever by RBS -- as of this time all coupons have been paid, and it was their option not to redeem.

    I will pick up a few more shares if the weakness continues

    EURO CORP-CDS on RBS widen, indexes marginally tighter
    Live Chat!

    Sunday September 06, 2009 03:49:08 AM GMT
    Reuters News

    * Subordinated financials index slightly wider

    * Main CDS indexes little changed as U.S. jobs data awaited

    * EDF, RCI Banque offer two new euro issues in cash market

    By Jane Baird

    LONDON, Sept 4 (Reuters) - Credit default swaps on Royal Bank of Scotland jumped wider on Friday after the British bank said it would not call four subordinated notes in October at the instigation of the market regulator.

    Five-year credit default swaps on RBS subordinated debt widened by around 20 basis points to 325 basis points, a trader said.

    The Markit iTraxx five-year subordinated financials index was 2 basis points wider at 177 basis points, the trader said. The index had widened by more than 5 basis points soon after the RBS announcement.

    "The concern is could other UK banks be forced to follow suit by the regulator," credit strategists at BNP Paribas said. "However, the general feeling is that the reaction could mellow out as these are in fact relatively small issues."

    The four deals included two Upper Tier 2 notes for 400 million euros ($570.8 million) and 100 million euros and two Lower Tier 2 notes for 590 million Australian dollars ($495.8 million) and 410 million Australian dollars.

    Five-year CDS on RBS senior debt widened by around 6 basis points to 131.50 basis points, according to Markit data.


    Meanwhile, European CDS indexes were little changed as investors awaited key U.S. data on non-farm payrolls later in the day.

    By 0829 GMT, the investment-grade Markit iTraxx Europe index was at 97 basis points, according to data from Markit, 1 basis point tighter versus late on Thursday.

    The Markit iTraxx Crossover index, made up of 44 mostly "junk"-rated credits, was at 619 basis points, 1 basis point tighter.

    "The focus has quickly turned to the labour report at the end of the week," BNP strategists said. The numbers "could set the tone for the next few weeks, which should also see trading volumes return to normality following the long weekend in the U.S."

    In the cash bond market, two euro issues came from EDF for 15 years and RCI Banque for two years.

    "In cash credit, we're focussing on the new issue pipeline, with investors hoping the sluice gates open pretty sharpish to allow them to get invested," wrote SG CIB strategist Suki Mann.

    "If they don't manage this, we think investors will be forced to chase - albeit reluctantly - the secondary market tighter."

    The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 145.1 basis points more than similarly dated government bonds, 0.5 basis points less on the day.

    In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz was 1.156 percent, 0.1 basis point less on the day. The 10-year Bund yielded 3.261 percent, 1.7 basis points more.

    The 10-year euro swap rate was 3.4670 percent. (Reporting by Jane Baird; Editing by Jon Loades-Carter)

10.22+0.07(+0.69%)1:11 PMEDT

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