Bloomberg News

BNP Paribas Bonds Tumble Amid U.S. Money Market Funding Concerns

September 13, 2011

Sept. 13 (Bloomberg) -- Bonds of BNP Paribas SA, France’s largest bank, dropped amid concern U.S. money market funds are shutting off lending to the nation’s banks because of their sovereign debt holdings.

BNP’s 1.3 billion euros ($1.8 billion) of 4.5 percent senior unsecured bonds due in 2023 dropped 3.65 cents to 101.72 cents on the euro, according to Bloomberg Bond Trader prices. The cost of insuring the bank’s senior debt against default surged to a record.

The Paris-based lender’s shares tumbled 12 percent in Paris after an unidentified bank official told the Wall Street Journal BNP can’t borrow in dollars because money-market funds are no longer lending to it. The bank denied the report and said in a statement that it can fund in the U.S. currency at normal levels “directly and through foreign-exchange swaps.”

French lenders top the list of Greek creditors with $56.7 billion in overall exposure to private and public debt, according to a June report by the Bank for International Settlements. U.S. money-market fund managers have cut loans to French banks at a pace that may force the institutions to raise capital by selling assets, William Prophet, a Deutsche Bank Securities Inc. analyst in New York, wrote in a Sept. 9 report.

Spreads Widen

Investors demand 2.64 percentage points in extra yield to buy BNP’s 4.5 percent 2023 notes instead of benchmark German government debt, Bloomberg bond trader prices show. That compares with a spread of 1.37 percentage points when the notes were issued in March.

The bank’s 900 million euros of 4.125 percent securities due 2022 slid 2.959 cents on the euro to 99.110, Bloomberg Bond Trader prices show. The yield relative to German debt has widened to 2.64 percentage points from 1.36 percentage points at the end of July.

Credit-default swaps on BNP’s senior debt surged 18 basis points to 323, an all-time high based on closing prices, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. A basis point on a credit-default swap protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year.

--With assistance from Vidya Root in Paris. Editors: Andrew Reierson, Cecile Gutscher

To contact the reporter on this story: Ben Martin in London at bmartin38@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net


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