Traders Eye Potential Windfall in Defunct Signature Bank’s Bonds

Traders are betting that bonds tied to the defunct Signature Bankhold unexpected value, sending prices on the securities soaring from near zero.

In recent days, the bank’s 4% subordinated bonds due 2030 have jumped to around 13 cents on the dollar, after trading in November for a quarter of a penny, according to Trace. Its 4.125% subordinated notes due 2029 also last changed hands at 13 cents, up from a penny last month.

The surge of activity in the bonds — which have been thinly traded since the Federal Deposit Insurance Corporation took over the New York-based bank ...