First Republic Bank paper turns positive; Bed Bath short-dated notes trade; DISH up

By Cristal Cody

Tupelo, Miss., April 27 – First Republic Bank’s notes and stock got a reprieve on Thursday after two prior punishing sessions.

The paper traded about ¼ point to 1¼ points better on the day after shedding more than 20 points on Tuesday and Wednesday after the bank reported it had lost $100 billion in deposits in the first quarter.

First Republic Bank’s stock also recovered 8.79% after sinking nearly 80% over the prior two sessions.

Talk of zombie banks was increasing on Thursday.

However, the “regional banking system is relatively stable today, and thus zombie banks are a worst-case scenario that is very unlikely to materialize,” Confluence Investment Management strategists said in a note on Thursday.

Market focus also is shifting toward the Federal Reserve’s monetary policy meeting in May and the chances for another rate hike as bank concerns continue.

The Fed is forecast to hike rates by another 25 basis points in what is predicted to be the end of the cycle, according to a note Thursday from BNP Paribas Securities.

A rate cut is not anticipated until the first quarter of 2024.

“We think cumulative tightening should be enough to engender a downturn and repress inflation, particularly given we do not expect a first cut until Q1 2024, later than implied by market pricing for cuts to begin as soon as this summer,” BNP analysts said. “Financial conditions and bank credit intermediation will weigh heavily on near-term policy decisions.”

Market tone was stronger on Thursday with stock indices more than 1% higher and volatility on the wane.

The S&P 500 index closed up 1.96%.

The iShares iBoxx High Yield Corporate Bond ETF added 24 cents, or 0.32%, to $75.03.

The CBOE Volatility index declined 10.62% by the close to 16.84.

Bed Bath & Beyond Inc.’s short-dated paper was moving in the distressed secondary market over the session.

The bankrupt retailer’s 3.749% notes due 2024 (C/D) traded with a 2 handle.

DISH Network Corp.’s bonds were about ¼ point to more than 1 point better following a downgrade from S&P Global Ratings on Thursday.

First Republic notes up

First Republic Bank’s paper saw an improvement in the secondary market on Thursday, trading about ¼ point to 1¼ points better after shedding more than 20 points on Tuesday and Wednesday, a source said.

The 4 3/8% subordinated notes due 2046 (B2/B-) added 1¼ points to head out at 26 bid on $5 million of volume.

The issue was down 7¾ points on Wednesday and off 15 points on Tuesday.

First Republic Bank’s 4 5/8% subordinated notes due 2047 (B2/B-) also recovered ¼ point on Thursday to a quote of 25¾ bid on $9 million of trading.

The tranche went out Wednesday 6½ points lower and gave back 14 points on Tuesday.

The declines in the bank’s paper and equity came after First Republic reported Monday that first-quarter income declined and deposits dropped 35.5%, despite an infusion of $30 billion of deposits from 11 major banks in March.

The San Francisco-based bank’s stock, down 49.37% on Tuesday and 29¾% on Wednesday, closed Thursday up 8.89% at $6.19.

Bed Bath & Beyond active

Bed Bath & Beyond’s 3.749% notes due 2024 (C/D) were traded at a print of 2.68 on $4.5 million of secondary volume on Thursday, according to a market source.

The yield was 683.57%.

The bankrupt retailer’s stock remained active in heavy trading, closing the day up 4% at 11.65 cents.

Bed Bath & Beyond announced Sunday that it filed for Chapter 11 bankruptcy and plans to liquidate all of its 360 stores and 120 buybuy Baby stores unless a buyer is found.

The Nasdaq Stock Market reported it will suspend trading in the Union, N.J.-based home products company’s stock on May 3.

DISH notes gain

DISH’s notes bumped higher on Thursday on about $19 million of secondary trading, a market source said.

DISH DBS Corp.’s 7¾% senior notes due 2026 (B3/B-) rose about ½ point to 58 bid on $6 million of volume in the most active issue seen.

DISH’s 5 7/8% senior notes due 2024 (B3/B-) added ¼ point to a quote of 82¾ bid on $5.8 million of supply.

The 7 3/8% senior notes due 2028 (B3/B-) picked up 1½ points on $4.5 million of supply on Thursday. The notes went out at 50 bid.

Also, DISH’s 5 1/8% senior notes due 2029 (B3/B-) were up ¼ point at 45 bid on $4 million of volume.

S&P said Thursday that it downgraded DISH Network and DISH DBS by one notch, noting the company has a large amount of debt maturing in the next three years, including $3 billion of debt from two bonds due in 2024.

The company’s credit default swap spreads moved out 305 basis points this past week ended Wednesday to 2,746 bps, according to a Moody’s Investors Service note.

The Englewood, Colo.-based satellite cable operator’s stock finished 5.32% higher on Thursday at $7.32.

Distressed returns decline

S&P U.S. High Yield Corporate Distressed Bond index one-day returns continued to decline on Wednesday to minus 0.18% from 0.01% on Tuesday and 0.43% on Monday.

Month-to-date returns fell to 2.13% midweek from 2.21% on Tuesday and 2.3% at the start of the week.

Year-to-date total returns dropped Wednesday to 6.74% versus 6.93% on Tuesday and 6.92% on Monday.

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