AT1 Bonds Are So Popular That Spreads Are the Tightest Ever (1)

Demand for the riskiest bank bonds is so strong that the spread investors demand to hold them is the tightest since the securities were created more than a decade ago.

The average risk premium on a Bloomberg index that tracks secondary market prices of AT1s by European lenders — the main issuers of this type of debt — ended Monday at 255.2 basis points.

Yield-seeking investors have been flooding this risky corner of the credit market, which was introduced to comply with regulation after the global financial crisis. Despite the rally, the bonds, which are issued by fundamentally sound lenders, ...