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After Steamrolling Credit Suisse AT1 Investors, UBS Is Selling CoCo Bonds Of Its Own

After Steamrolling Credit Suisse AT1 Investors, UBS Is Selling CoCo Bonds Of Its Own

Wall Street’s institutional memory is now officially…



After Steamrolling Credit Suisse AT1 Investors, UBS Is Selling CoCo Bonds Of Its Own

Wall Street's institutional memory is now officially shorter than that of an HFT algo.

Exactly half a year after countless investors were obliterated when the forced bail-in of now-defunct Swiss giant Credit Suisse by UBS inverted the recovery waterfall, and wiped out AT1 bondholders while still preserving (fractional) equity value to avoid the optics of bank failure, none other than UBS is testing if lighting can strike twice, and according to the FT is - hilariously - roadshowing to potential investors an AT1 (aka Contingent Convertible) bond of its own, despite the now legendary writedown of such bonds issued by its crosstown peer, that crushed confidence in the market and triggered a wave of lawsuits. But apparently confidence wasn't crushed quite nearly enough, however, and now UBS is trying to see just how much dumb money is really left out there.

According to the report, UBS executives have been pitching investors after reporting blowout quarterly results last month, in which the bank earned a record $29 billion - the largest quarterly profit that any bank has ever reported and was the 2nd highest profit of any company during Q2 behind only Berkshire Hathaway - thanks to the historic transfer of "good" CS assets to UBS while Swiss taxpayers remain on the hook for the "bad" ones.

During the roadshow, the UBS team suggested changes to the terms of future additional tier 1 securities to make them more palatable to bondholders, however fundamentally the underlying security still remains the same bag of worthless horseshit come a worst case scenario, which it will. UBS has been under pressure to replace up to $17bn of Credit Suisse AT1 bonds in the coming years to improve the efficiency of the enlarged bank’s capital structure and free up funds for shareholder returns and potential acquisitions.

Not everyone is an idiot, however, and some investors are wary after bondholders lost billions of dollars during the rescue of Credit Suisse when an emergency law brought in by the Swiss government allowed the country’s financial regulator, Finma, to "protect" shareholders while wiping out AT1 holders.

Similar to the bailouts of labor unions in US automakers after the financial crisis, the decision shook up the traditional hierarchy of bank creditors and undermined confidence in AT1s, which were introduced after the financial crisis as regulators tried to shift risk away from depositors and imposed greater capital requirements on banks in case of failure.

“UBS are working frantically in the background to sort this out,” said a bond fund manager who recently met the bank’s representatives. “They need to give investors confidence that the capital structure won’t be inverted and the rules won’t be changed at the eleventh hour again.”

One option discussed is replacing UBS’s AT1 bonds, which are designed to be written down in the event the bank runs into trouble, with versions of the security that would be converted into equity.

“Equity conversion is probably better and there is more demand if you do it like that,” said another bond investor. “But we are not naive and don’t think it changes the risk.”

AT1s have no maturity date but can typically be called every five years by the issuer. Banks usually call AT1s when they are able to and reissue replacements. UBS has a S$700mn ($510mn) bond that is callable at the end of November and $2.5bn bond that is callable at the end of January.

When UBS in August reported $29bn in profit, a record quarterly figure for a bank, due to an accounting gain from the Credit Suisse takeover, chief executive Sergio Ermotti said it was weighing up when to re-enter the AT1 market.

“We are watching the market carefully,” he said. “We will assess the timing and the need of tapping the markets when appropriate.”

“They will have to make their bonds as investor-friendly as possible,” said a bond manager involved in the UBS roadshow. “They will have to pay a premium, too.”

“I think they’ll be able to get a deal done,” said another investor. “UBS is obviously an absolutely massive bank now, probably too big to fail and too big to save for the Swiss economy now, considering its size.”

Of course, he is right, and the moment he sees some whale account take down 30% or more of the offering, every Tom, Dick and Henrich managing other people's money will call scramble to get a piece of the 10x oversubscribed action, completely oblivious that in a few years they will again be suing UBS for getting written down to zero, just as the fine print warns. Only this time Switzerland - which idiotically agreed to make UBS a bank that is far bigger than Swiss GDP ever will be - will not be bailing anyone out anymore as it too will find itself dragged down to the bottom.

Tyler Durden Tue, 09/19/2023 - 07:45

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US Dollar Index Higher on JOLTs Data

Hiring was unchanged at around 5.9m (3.7%); total separations, which, according to the Bureau of Labour Statistics (BLS), include quits, layoffs, discharges…



Hiring was unchanged at around 5.9m (3.7%); total separations, which, according to the Bureau of Labour Statistics (BLS), include quits, layoffs, discharges and other separations, was also little changed at 5.7m (3.6%). The quit rate came in at 3.6m and was almost the same as the previous month at 2.3%. The BLS noted that the number of quits increased in accommodation and food services, finance and insurance, as well as state and local government.


Markets were not totally reactive on the back of this release. However, it did initially guide major US equity indices lower and lift the US Dollar Index to fresh YTD pinnacles, pulling price action to within striking distance of resistance on the daily timeframe at 107.61. The release also sent the USD/JPY beyond the ¥150.00 handle for the first time since October 2022 and weighed on the EUR/USD further under monthly support at $1.0516.


As seen from the monthly and daily charts below, the US Dollar Index demonstrates room to continue exploring higher levels.














The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.


The post US Dollar Index Higher on JOLTs Data appeared first on LeapRate.

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Crypto Ponzi scheme AirBit: All but one exec now sentenced

AirBit Club co-founder Dos Santos is now the last AirBit defendant not yet sentenced but is scheduled to learn his fate on Oct. 4, 2023.



AirBit Club co-founder Dos Santos is now the last AirBit defendant not yet sentenced but is scheduled to learn his fate on Oct. 4, 2023.

The United States District Court for the Southern District of New York is progressing with the sentencing procedure of key individuals behind the cryptocurrency Ponzi scheme AirBit Club.

The office of the U.S. attorney for New York on Oct. 3 announced the sentencing of three of the five surviving defendants in the AirBit case, including Scott Hughes, Cecilia Millan and Karina Chairez. The sentences came months after all three defendants pleaded guilty to money laundering and other charges in the AirBit case in early 2023.

Hughes, an attorney who allegedly laundered approximately $18 million in AirBit Club fraud proceeds, was sentenced to 18 months in prison. Millan, a senior-level promoter of AirBit Club, was sentenced to five years in prison. Chairez, another senior-level promoter of AirBit Club, was sentenced to one year and one day in prison.

Additionally, Hughes was sentenced to three years of supervised release. Millan and Chairez were also sentenced to three years and three months of supervised release, respectively.

The AirBit Club scheme was launched in late 2015 and was promoted as a “multi-level marketing club” in the cryptocurrency industry. The defendants provided promising presentations to trick investors into thinking that AirBit Club had guaranteed daily returns from crypto mining and trading. But instead of funding AirBit’s promoted crypto operations — which in fact had never been the case — $100 million of investors’ money went to the pockets of its founders and promoters.

Despite some users complaining about withdrawal delays and hidden fees in early 2016, the AirBit Club scheme managed to maintain its fraudulent activity until 2020.

AirBit Club presentation by Cecilia Millan from 2019. Source: YouTube

Announcing the sentences, U.S. attorney Damian Williams stressed that Hughes, Millan and Chairez each played a key role in perpetuating the AirBit Club pyramid scheme.

Related: 5 highlights of Sam Bankman-Fried’s first day of trial

“At the top-tier of promoters, Millan and Chairez for years aggressively solicited investments from and misled hardworking and unsophisticated investors to line their own pockets,” Williams said, adding:

“Today’s sentences send a message that anyone who facilitates cryptocurrency investment schemes — not only those at the very top of the pyramid — will face serious consequences for such crimes.

This comes after AirBit Club co-founder Pablo Rodriguez was sentenced to 12 years in prison in late September 2023. Dos Santos, another co-founder who has pleaded guilty to charges including wire fraud conspiracy, money laundering and bank fraud conspiracy, is scheduled to be sentenced on Oct. 4, 2023.

Santos will be the last defendant to be sentenced out of a total six defendants behind AirBit Club. Jackie Aguilar, who pled guilty in February 2023, reportedly passed away in May, a few weeks prior to sentencing.

Magazine: Blockchain detectives — Mt. Gox collapse saw birth of Chainalysis

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Here’s how Bitcoin investors can trade amid tension surrounding a US gov’t shutdown

Rumors of a U.S. government shutdown impact asset prices, including Bitcoin. Here’s how BTC options traders can capitalize on the 45 day funding deadline….



Rumors of a U.S. government shutdown impact asset prices, including Bitcoin. Here’s how BTC options traders can capitalize on the 45 day funding deadline.

Bitcoin’s (BTC) price bullish action toward $28,000 on Oct. 1 was partially fueled by the uncertainty regarding the United States debt limit. However, United States President Joe Biden signed the spending bill just hours before the Sept. 30 deadline, avoiding a government shutdown.

Investors now question whether the momentum remains favorable for cryptocurrencies, given that the worst-case political-economic scenario is no longer on the table. However, it is worth noting that this bill merely provides extra funding for the next 45 days, giving more time for the House and Senate to work on their funding plans for 2024.

At first glance, it might be tempting for investors to use futures contracts to go long on Bitcoin. However, there’s a significant risk of getting liquidated if the price suddenly drops, and it’s impossible to predict whether a successful budget discussion down the road will benefit cryptocurrencies.

With the current extension in place, lawmakers now need to find a solution before Nov. 17. According to Margaret Spellings, president and CEO of the Bipartisan Policy Center:

“We can’t continue postponing our fiscal health and negotiating on the brink of government shutdowns and debt defaults.”

There’s no doubt that, despite narrowly avoiding a crisis, the overall risk of an economic recession remains. The U.S. Federal Reserve is grappling with persistent inflation and rising energy prices, factors that have driven the S&P 500 to its lowest point in 110 days and pushed the 10-year Treasury yield to levels not seen since October 2007.

Additionally, oil prices have surged to $90, marking a 27.5% gain in just three months. This upward pressure on inflation is expected to further constrain economic activity.

On Sept. 27, Minneapolis Fed President Neel Kashkari expressed uncertainty about whether interest rates have been raised sufficiently to combat this price growth.

Bitcoin’s initial reaction does not guarantee bullish momentum

Amid all this turmoil, Bitcoin has increased in value, breaking through the $28,000 resistance on Oct. 2. This performance prompted investors to anticipate heightened volatility for the cryptocurrency as the upcoming debt ceiling decision approaches.

Professional traders will avoid directional risk, given the uncertain outcome of the political debate, and opt for the reverse (short) iron butterfly, a limited-risk, limited-profit trading strategy.

Profit/loss estimate. Source: Deribit Position Builder

The prices mentioned were accurate as of Oct. 2, with Bitcoin trading at $28,326. All options listed expire on Oct. 27, but this strategy can also be adapted for different time frames. It’s essential to remember that options have a set expiry date, meaning that the price increase must occur during the defined period.

The recommended neutral-market strategy involves selling 5.4 contracts of $26,000 put options while simultaneously selling 5.4 call options with a $30,000 strike. To complete the trade, one should buy 5.8 contracts of $28,000 call options and an additional five contracts of $28,000 put options.

While a call option grants the buyer the right to acquire an asset, the contract seller assumes a potential negative exposure. To fully shield against market fluctuations, an investor must deposit 0.253 BTC (approximately $7,170), representing the maximum potential loss.

Conviction in volatility is essential, as the risk-reward is reversed

For this investor to profit, Bitcoin’s price must be below $26,630 on Oct. 27 (a decrease of 6%) or above $29,280 (an increase of 3.4%). In essence, the trade offers a potentially substantial profit zone, but losses are 90% higher than potential gains if Bitcoin remains stagnant.

The maximum payout is 0.133 BTC (roughly $3,770). However, if a trader believes that volatility is imminent, a 6% movement within 24 days appears achievable.

It’s important to note that investors have the option to reverse the operation before the options expire, preferably after a substantial Bitcoin price movement. To do this, they should repurchase the two options they had initially sold and sell the two options they had originally bought.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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