First Republic Bank bonds, stocks rally as major banks reportedly preparing bailout plan

Bond issued by First Republic Bank FRC,
rallied on Thursday as investors digested a report on a possible rescue plan for the California-based lender.

The lender’s 4.375% coupon maturing August 2046 was pegged at a spread of 379 basis points over risk-free government bonds and was up about 100 basis points, according to MarketAxess.

On a yield basis, that’s a yield of about 7.4% and a price of about 66.8 cents on the dollar, compared to a yield of 8.2% and a price of about 60 cents, suggesting investors have a little less compensation require to take long-term risks to the First Republic. Nonetheless, bonds priced below 70 cents per dollar are generally considered distressed.

A group of America’s largest banks including JPMorgan Chase & Co., JPM,
Citigroup Inc.C,
Bank of America Corp. BAC,
and Wells Fargo & Co. WFC,
discuss plans to shore up the First Republic, The Wall Street Journal reported on Thursday, citing people familiar with the matter.

A spokesman for the First Republic declined to comment.

First Republic stock was also up Thursday, recovering from the session’s worst levels but still down about 73% from the year, according to FactSet.

Since the collapse of Silicon Valley Bank SIVB, investors have been worried about the regional banks.

and signature bank SBNY,
raising concerns about the pressure on the banking system as the Federal Reserve has hiked interest rates sharply over the past year.

US Treasury Secretary Janet Yellen told senators Thursday that the US banking system remains on solid footing and Americans can rest assured of their deposits.

Credit Suisse CS,
also sparked concerns among investors this week after its shares fell to around $2 in New York on Wednesday. Shares rallied on Thursday after the Swiss banking giant announced it would tap its central bank for 50 billion francs ($54 billion) and make an offer to buy ailing debt.

U.S. stocks were higher on Thursday, with the Dow Jones Industrial Average DJIA,
The S&P 500 Index SPX rose 300 points, or 1%,
1.4% higher and the Nasdaq Composite Index COMP,
Up 2% according to FactSet at last check.

Related: US bank stocks turned green after reports that Morgan Stanley and JPMorgan could help the ailing First Republic raise capital

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