Bloomberg News

JPMorgan Bonds Slide Most in 6 Months After $2 Billion Loss

May 11, 2012

Bonds of JPMorgan Chase & Co. (JPM:US) declined the most in six months after the firm said it suffered a $2 billion trading loss at a unit set up to manage risks.

The yield premium investors demand to hold the lender’s $6 billion of undated 7.9 percent junior subordinated notes rather than the 0.875 percent Treasury due 2018 rose 16 basis points to 392.2 basis points, according to Bloomberg Bond Trader prices at 10:10 a.m. in London. The price of the note, callable in 2018, fell 2.2 cents on the dollar to 107.84 cents, pushing up the yield to 6.3 percent.

The firm’s chief investment office lost money on bets on synthetic credit securities that remain volatile, Chief Executive Officer Jamie Dimon told analysts yesterday. Losses mounted as JPMorgan tried to lay off hedges against credit positions.

JPMorgan’s problem given the size of the positions it takes is “moving in and out of markets in an orderly fashion, yet without too much disruption of related pricing,” CreditSights Inc. analysts led by David Hendler in New York said in a note. The loss “puts into question the accuracy and calibration of JPMorgan’s” risk models.

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $60.91 USD
    • -0.20
    • -0.33%
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