One of the most significant news stories in bond markets recently is the failure of Banco Popular, its sale to Santander for €1 and the wipeout of its equity and junior bonds.
In market terms, the event saw the first writedown of Additional Tier One (AT1) debt instruments since the sub-asset class was introduced in 2013. The AT1 or CoCo (Contingent Convertible) market has many attractive features. Firstly, it has provided attractive risk-adjusted returns from the outset, with returns high by relative standards. TwentyFour AM's Kirk on the attraction of CoCos The Bank of America Merrill Lynch Contingent Capital index currently has a redemption yield of more than 6% and its duration (nearly all credit spread) is close to 4. By contrast, the same featur...
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