Bond Investors Buy AT1s As If Credit Suisse Never Happened (1)

A day that started with a blunt call to investors ended with incredulous fund managers at Algebris Investments facing double-digit losses. It was March 20, and the Swiss government had just taken the unprecedented decision to wipe out $17.3 billion of junior debt as part of a forced merger between Credit Suisse Group AG and UBS Group AG.

The move set off a global slump in the price of additional tier 1 bonds, as the riskiest banking debt is known, with some forecasting that it would serve as a death knell for the entire asset class. As one of the world’s top ...