According to Bloomberg data analyzed by Asia Markets, some of the world’s largest asset managers have exposure to Silicon Valley Bank bonds.
The bonds have cratered after the bank’s collapse late last week, with SVB Financial’s April 2023 4.57% paper trading as low as 31 cents in the dollar on Friday.
Investment manager, Cohen & Steers Inc, is the biggest known holder of SVB bonds. The New York-headquartered firm has close to $100 billion in total assets under management.
Asset management giant, Vanguard is the second-largest known holder of SVB bonds, followed by Japan’s Government Pension Investment Fund, BlackRock and Janus Henderson group.
SVB bondholders to be “wiped out”
Holders of SVB bonds would have been hoping for a Government bailout as the bank began to collapse. Holders of debt are further up in the capital structure of companies than equity holders, however all hope of recouping any capital invested into SVB bonds has now been lost.
“They’ll be wiped out,” said a senior Treasury official in a briefing call with financial media on Sunday.
As reported by Bloomberg, this took many dealers by surprise who were still engaged in market-making for SVB bonds on Sunday.
“At least a handful of dealers were making markets Sunday in the bonds of the bank’s parent, SVB Financial Group, said the people, who asked not to be identified because the trading activity is private.
“Some investors were seeing the bank’s senior unsecured bonds being offered at more than 50 cents on the dollar on Sunday afternoon. That’s higher than the roughly 37 cent- to 42-cent cent prices at which the bonds changed hands at the end of Friday, according to prices compiled by the US trade reporting system known as Trace.”
Top 5 SVB bondholders
The five biggest holders of Silicon Valley Bank bonds
- Cohen & Steers
- Vanguard Group
- Government Pension Investment Fund of Japan
- Blackrock
- Janus Henderson Group
Further reading on the collapse of Silicon Valley Bank
Asia Markets: Silicon Valley Bank CEO Greg Becker sold SIVB stock in January, making a fortune
Greg Becker, the chief executive officer of Silicon Valley Bank, made a personal profit of $3.37 million in January, after converting SIVB options and selling stock.
The trades were made just weeks before The California Department of Financial Protection and Innovation closed the bank and appointed the Federal Deposit Insurance Corporation (FDIC) as its receiver.
Asia Markets: Suspicious Silicon Valley Bank options trade generated $1.2m profit within hours
Just hours before it was revealed Silicon Valley Bank – the 18th largest bank in the U.S. – is on the brink of bankruptcy, one options trader executed a trade that would turn $4000 into just over $1.2 million.
Asia Markets: Silicon Valley Bank collapse explained (5 reasons the bank went bust)
A leading macro analyst’s take on the key reasons Silicon Valley Bank failed.
Timeline of the SVB bank collapse
- February 2023: Rumors surface about Silicon Valley Bank facing pressure on $91 billion in bonds due to rising interest rates. Articles including this Financial Times piece emerged.
- February 2023: SVB announces firesale of $21 billion bond portfolio which is executed at a $1.8 billion loss.
- March 8, 2023: SVB announces $2.3 billion share sale to cover bond losses.
- March 9, 2023: SVB depositors reportedly scramble to withdraw funds as the bank tries to reassure clients their deposits are safe. A SVB bank run is reportedly underway.
- March 9, 2023: Credit rating agencies such as Moodys downgrade the bank.
- March 9, 2023: The four largest banks in the United States shed $50bn in market value as fears spread about the health on the U.S. banking system. SVB Financial Group stock falls over 60%.
- March 9: Rumours circulate that the bank has been desperately trying to find a buyer, however no buyer can be found.
- March 10, 2023: Financials and bank stocks across global markets are aggressively sold off amid fears stoked by Silicon Valley Bank.
- March 10, 2023: California state regulators shut down Silicon Valley Bank and appoint the Federal Deposit Insurance Corporation (FDIC) as its receiver, taking control of its deposits.
- March 10, 2023: SVB Financial stock tumbles another 60% in pre-market on Thursday night/Friday morning. The stock is put into a trading halt on Friday and trading never resumes.
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