Relevant articles for you

Video

Ole Hansen
Stay updated on what’s happening with oil, gold and other raw materials. Join Saxo Bank Head of Commodity Strategy Ole Hansen as he explores the world of commodities and how fundamentals, geopolitics and other factors could influence prices. He also looks at market opportunities for both traders and investors.
Strategic trade
Trade view / 30 June 2016 at 10:47 GMT

#SaxoStrats: Brexit not a solvency risk for RBS

Fixed Income trader / Saxo Bank
Denmark
Instrument: RBS:xlon
Price target:
Market price:
SaxoStrats
 
Theme 
The Brexit vote has led to substantial turmoil in all UK assets due to the increased political and economic uncertainty. However, we think these concerns are overblown and that a far more market-friendly exit deal is highly likely. 
As the worst performing sector, we think UK financials is the best rebound candidate. For Royal Bank of Scotland (RBS), which is still partially government-owned and where capital ratio has dramatically improved in recent years, we fail to see an increased solvency risk.
RBS
 
Source: Saxo Bank 

Valuation
Rating agencies have warned about downgrades for UK financials, which could derail the otherwise positive trajectory of RBS’ ratings (positive outlook with Moody’s and S&P), however we feel this is well versed in the market. 
At a 5.4% current yield to maturity, this bond is priced in line with BB USD financials.

Parameters
The bond has a low minimum trading size and can be bought down to 2,000 with 1,000 nominal USD increments. 
Return objective is primarily seen as hold-to-maturity, while short term price gain is a possibility as well.

RBS
Create your own charts with SaxoTraderGO click here to learn more 
Source: Saxo Bank  

Key risks
The main risk is centered on the Brexit fallout and reinforced political and/or economic uncertainty in the UK. Furthermore, changes to the government’s ownership commitment to RBS as well as capital events in other debt instruments may impact valuation as well. 
This bond does not have a CoCo structure, hence coupons are firm and principal can’t be written down in “going concern”, however as subordinated capital the bond is exposed outside of “going concern”.

— Edited by Michael McKenna

For more on bonds click here.

Non-independent investment research disclaimer applies. Read more
30 June
fxtime fxtime
You suggest hold to maturity....can I ask what is the maturity remaining on these bonds as normally I avoid corporate bonds and stick to treasury etc?
30 June
Michael Boye Michael Boye
This bond matures in 2022 and yields 5,4% to maturity effectively.
30 June
fxtime fxtime
Wow longer than I expected. Thanks for the quick response.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail