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The Royal Bank of Scotland Group plc Message Board

  • rexobxip rexobxip Aug 6, 2013 3:25 PM Flag

    What is causing RBS preferreds to drop so precipitously?

    I realize that long term rates are rising but these are yielding 7.6-8.1% well above the average for debt/preferreds. Yet these have dropped 15-20% in the last year and show no sign of stopping. Any insights?

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    • The drop in RBS preferreds (greater in the "may pays" and trust preferreds) seems to be caused by the possibilty of another EC ordered suspension. Here is the scenario: RBS gets split into good bank/bad bank; the aforementioned preferreds are placed in bad bank; to maintain viability of bad bank, the British gov't must provide either guarantees or money; with such gov't backing, the EC again orders a suspension of dividend payments b/c the bad bank would have a competitive advantage. I feel this chain of events highly unlikely, but that is why the drop.

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