, Columnist
Bond Buybacks and Bloody Fingerprints
Also banks, oil, exchanges, Twitter, Shkreli, unicorns, liquidity, etc.
Deutsche Bank.
Deutsche Bank's nervous investors were soothed yesterday by reports that Deutsche might buy back some of its own bonds at prices below par. The idea of the buyback would be to transform liquidity into capital: Deutsche Bank, the mooted buyback implies, has plenty of liquidity -- plenty of money lying around -- but wants to shore up its capital -- basically, its debt/equity ratio -- by reducing debt and booking an accounting profit on the difference between the price it pays for the bonds and their par value. Confidence in banks is based both on their liquidity and their capital, and if a bank has plenty of one and not enough of the other, it can boost confidence in itself by shifting the mix.