On the other hand, the decrease in the cost of deposits, thanks to lower Federal Funds rates, helps stability. Steady deposit flows in the fourth quarter suggest the odds are low that they could move quickly to other banks, reducing the risk that lenders will have to sell underwater bonds. Duration risk also decreases as securities approach maturity.

For now, “investors are a little less concerned about unrealized losses, because there doesn’t seem to be a forced selloff like there was with Silicon Valley Bank,” said Scott Hildenbrand, head of fixed income deposit at Piper Sandler.

Terry McEvoy, banking analyst at Stephens Inc., agrees. The company has met with at least 30 bank investors in recent days and it was not a major area of ​​discussion or concern, he said. The incoming Trump administration may also boost bank margins through deregulation, Piskorski told Columbia Business School.

Still, with the benchmark lending trend even as the Fed cuts interest rates, “we’re entering a very precarious position,” and “instead of escaping this area of ​​bank fragility, we’re moving forward into a growing area of ​​banking fragility,” Piskorski said. .

Week in review

• The six largest US banks issued corporate or preferred bonds this week, after releasing results. Issuance could pick up in the coming sessions thanks to falling yields, after an inflation report implied that price increases could be under control.

• It has never been cheaper to trade corporate bonds, thanks to the rise of electronic trading that allows a wider swath of investors to buy and sell large volumes of securities more quickly and efficiently.

• The first loan this year to finance a leveraged buyout came Thursday, with JPMorgan Chase & Co. supporting Silver Lake Management’s purchase of Endeavor Group Holdings Inc., the talent agency and controlling investor of WWE and the Ultimate Fighting Championship.

• China Vanke Co. rebounded from record lows in credit markets as people familiar with the matter said the distressed developer had previously told some creditors it had enough cash ready to pay off a local note.

• Repeated corporate bankruptcies in the United States are running at their fastest pace since 2020, as some companies still can’t recover even after debt relief.

• Software maker Databricks Inc. secured more than $5 billion in financing from lenders such as Blackstone Inc., Apollo Global Management Inc. and Blue Owl Capital Inc. in its largest debt collection to date.

• At least eight big ailing Chinese companies, including a unit of China Evergrande Group, will defend themselves in court cases related to their debt problems over the next two weeks, in one of the busiest stretches ever for such hearings .

• Blackstone’s flagship private credit fund pulled a planned $500 million investment-grade bond sale that was expected to be priced on Tuesday due to administrative delays.

• Goldman Sachs Group Inc. pulled out of a $1 billion deal to help Ecuador refinance debt, citing internal risk management controls.

• Altice France’s creditors are demanding the return of scrambled assets and a say in future board appointments as part of negotiations with the company over its 23.7 billion euro ($24.4 billion) debt.

• Prospect Medical Holdings Inc., once an active buyer of cash-strapped hospitals, filed for bankruptcy after struggling with debt and rising costs.

In Motion

• Paul Goldschmid, who was one of the longest-serving partners at King Street Capital Management before leaving the $26 billion hedge fund firm last year, announced on LinkedIn the launch of his own long credit firm /short, Harvey Capital Partners.

• Goldman Sachs Group Inc. promoted several key executives and combined teams to form a capital solutions group, a move that recognizes the growing importance of private markets. Pete Lyon, global head of the financial institutions group and financial and strategic investors group, and Mahesh Saireddy, global head of mortgages and structured products, will lead the new group.

• Lloyds Bank has appointed James Brown as managing director, head of leveraged finance and project finance syndication. Brown joins from Mizuho in London, where he led the leveraged debt capital markets business for five years.

• Ares Management Corp. promoted finance industry veteran Kevin Alexander to co-head of alternative credit. He will work alongside current co-heads Keith Ashton and Joel Holsinger.

• Banco Bilbao Vizcaya Argentaria SA has hired UBS Group AG’s head of structured credit and sustainable credit products for the Americas, Estanislao Fidelholtz, as managing director and head of its credit solutions structuring team in the US.

• Man Group has consolidated its European and North American CLO groups into a global syndicated loan business. Portfolio managers Joshua Cringle and Jonathan Newman will lead the new US platform with the ability to issue CLOs.

• Credit investor SC Lowy Financial HK Ltd. has laid off several staff members, according to the company’s CEO, as the firm moves away from trading public securities and toward private credit.

–With assistance from Greg Ritchie and Rheaa Rao.

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