New issuance will likely test market confidence
The niche market for additional tier one (AT1) bonds was thrust into the spotlight in March when Swiss regulator Finma ordered the writedown to zero of Credit Suisse’s AT1 bonds as part of the company’s sale to UBS.
This inflicted the largest loss in the history of AT1 bonds and the move was particularly controversial. With banks facing call dates in the coming months, we expect that AT1 issuance will return. Although it is still too early to say what the full impact will be for AT1 bonds, we believe the market is still viable but faces important tests ahead.
