Bank Bonds Become Attractive While Stocks Decline (AB)

A report in Bloomberg says that bank bonds have become attractive to large investors, after President Obama’s resolve to limit US Bank sizes reduced the market cap of financial sector firms by $430 billion.

The MSCI World Index saw bank stock fall by 5.1% while investors started to demand higher yield of 2.38 percentage points, up from 2.24 percentage points earlier. Companies like AllianceBernstein LP (NYSE: AB), Advantus Capital Management and the TCW Group have said that bank bonds are now much more attractive.

"It’s understood now that decisions such as letting Lehman Brothers file for bankruptcy are so dangerous and detrimental to an economy,” said Tad Rivelle, chief investment officer for Metropolitan West Asset Management LLC and a manager of TCW funds, where he helps oversee $55 billion. He is reported to be buying senior and subordinated debt securities of the largest financial firms because it is felt that a failure is “unlikely to be repeated.”