Ukraine crisis forces bank bond investors to rethink risk - chicagotribune.com

Ukraine crisis forces bank bond investors to rethink risk - chicagotribune.com:



"LONDON, March 25 (Reuters/IFR) - European banks such as Societe Generale, Credit Agricole and Unicredit will likely have to pay investors a higher return to buy the risky bonds that banks use to strengthen their balance sheets after the crisis in Ukraine forces a rethink about the potential dangers from such investments.



So far this year, European banks have sold over 7.5 billion euros of bonds to boost their core financial strength and bankers expect that tally to reach a record 40 billion euros for 2014 as mainstream investors such as insurers and pension funds, who need to boost returns, buy more of them.



But KBC Bank's sale of 1.4 billion euros worth of such bonds at an interest rate of 5.625 percent, the lowest ever offered despite the Belgian bank's chequered past, could mark the end of the sweet spot for banks hoping to sell such debt at rock bottom rates.



The KBC paper, issued two weeks ago, has dropped over 2 percentage points in the secondary market as a standoff between Russia and the West over Ukraine has increased volatility across financial markets and alarmed investors who fear banks could suffer disproportionately."



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