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Yield Chasers Are Moving Into Europe’s Risky CoCo Bond Market

July 30, 2021, 8:43 AM

It’s hard to find a bond where the spread hasn’t been squeezed out in the past year, except in a class of European bank debt.

Contingent convertibles, known in the industry as CoCos or AT1s, are one of the few kinds of debt trading at a wider spread than before the pandemic began. The securities pay a higher yield than most bonds, but in exchange investors take on the risk of losing everything if the bank fails.

That extra spread is tempting investors, who say financial firms will reap the benefits of robust economic growth coming out of the pandemic. ...

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