As the dust settles on a surprise move by Switzerland to write down $17 billion of bonds under Credit Suisse's rescue, the market for debt designed as a shock absorber for banks faces a long haul to regain investor trust
, part of bank capital buffers that insulate taxpayers from funding bail-outs, was rocked by the Swiss authorities' decision on March 19 on Credit Suisse AT1s.after sharp price falls over the last week.
Eric Larsson, managing director at asset manager Alcentra, said the market would become "bifurcated". Well-capitalised banks, he added, will be able to issue AT1s, paying investors the higher returns demanded, while smaller ones "get temporarily, potentially shut out". Concern that banks will be unable to sell AT1 debt has weighed on share prices, with European banking stocks down 13% in March in their biggest monthly drop in two years"The AT1 market is hurting and while it's hurting, you won't see any new issuance," said Mark Holman, partner at TwentyFour Asset Management, noting that current yields were too high for banks to issue at.The average yield on AT1 bonds in Europe has jumped to around 14.
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