As US government officials pledged to fully protect all depositors of the failed Silicon Valley Bank, they had a specific message for investors in the bonds and shares of the bank’s holding company.

They’ll be “wiped out,” a senior Treasury official said in a call with reporters late Sunday.

Yet some traders appear to be betting that the recovery value of bonds issued by parent SVB Financial Group will be higher than the market was pricing in during the tumultuous Friday session.

The senior unsecured bonds were changing hands at around 47 to 50 cents on the dollar on Monday (Mar 13) morning, higher than the roughly 37 to 42 cents at the end of Friday, according to data from the US trade reporting system known as Trace. SVB bonds were among the most actively traded obligations over the Monday session, per Trace.

The parent has assets that could be used in a bankruptcy to repay creditors, including US$2.3 billion in cash, US$491 million in investments and non-bank units worth US$896 million, according the company’s annual report. 

Investors and credit graders expect the holding company will be put into Chapter 11 bankruptcy after the government seizure of its banking operations. That would leave ultimate recoveries at the mercy of US courts and whatever value creditors can squeeze from the remaining assets of that entity. 

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In a rare Sunday session, Goldman Sachs Group, Citigroup and Stifel Financial were among dealers making markets in the bonds, said the people, who asked not to be identified because the trading activity is private.

Representatives for Citigroup and Goldman Sachs declined to comment, while messages left with Stifel were not immediately returned. 

It’s unclear how much, if any, SVB bonds actually traded on Sunday. And many bond investors are struggling to value the debt given the fast-moving news. 

Overall, the holding company owes its creditors US$3.7 billion. The entire SVB corporate group has about US$7 billion in debt, according to information on the Bloomberg terminal. BLOOMBERG