# Global bank bonds claw back losses as markets rout eases
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-03-21
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: European Bank AT1 Bonds Recover After Credit Suisse Hit
Meta Description: Discover how bank bonds and shares are bouncing back after the Credit Suisse turmoil, with AT1 bonds on the rise and stock prices stabilising.
URL: https://financedigest.com/global-bank-bonds-claw-back-losses-as-markets-rout-easeshtml

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LONDON/SINGAPORE (Reuters) – An uneasy calm descended across battered bank bonds and shares on Tuesday, with prices recovering a day after regulators sought to convince investors that the hit facing bondholders of embattled Credit Suisse is isolated.

Additional Tier 1 (AT1) bonds issued by European lenders rose, with UniCredit’s 6.625% issue up more than 5 cents.

AT1 bonds from others such as Deutsche Bank, UBS and BNP Paribas rose more than 3 cents, data from MarketAxess and Tradeweb showed.

On Monday bank [AT1 bonds](https://www.financedigest.com/stanchart-ceo-says-at1-bond-wipeout-has-profound-impact.html "StanChart CEO says AT1 bond wipeout has profound impact") took a beating after news that those issued by Credit Suisse would be written down to zero as part of a rescue merger with UBS.

Banking supervisors in Britain and the euro zone then tried to stop a [market](https://www.financedigest.com/improving-reputation-in-the-banking-sector-through-marketing-communications.html "IMPROVING REPUTATION IN THE BANKING SECTOR THROUGH MARKETING COMMUNICATIONS") rout by stressing holders of such junior bank debt would only suffer losses after shareholders had been wiped out.

The European Central [Bank’s top supervisor Andrea Enria said on Tuesday European Union authorities would never write off bank](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters") bonds before shares were wiped out, whether a bank is being wound down or there are “private solutions” to rescue it.

Tuesday’s AT1 rebound only partially offset hefty losses of 5 cents or more suffered on Monday and [sentiment remained](https://www.financedigest.com/6-months-to-go-until-brexit-and-investor-sentiment-remains-bold.html "6 months to go until Brexit and investor sentiment remains bold") fragile.

Looking forward, the [bank debt market](https://www.financedigest.com/in-a-rising-market-are-banking-outsourcers-pulling-their-weight.html "In a rising market, are banking outsourcers pulling their weight?") is likely to remain fragile as well as vulnerable for news headlines,” said Joost Beaumont, head of bank research at ABN AMRO.

AT1s are issued by [banks to help them make up regulatory](https://www.financedigest.com/how-banks-can-avoid-regulatory-reporting-mistakes-with-a-good-dose-of-automation.html "HOW BANKS CAN AVOID REGULATORY REPORTING MISTAKES WITH A GOOD DOSE OF AUTOMATION") capital buffers.

[Credit Suisse’s own AT1 bonds](https://www.financedigest.com/mitsubishi-ufj-to-postpone-at1-bond-issuance-in-credit-suisse-fallout.html "Mitsubishi UFJ to postpone AT1 bond issuance in Credit Suisse fallout") were trading with bid prices around 3 cents on the dollar and ask prices around 6, according to Tradeweb, suggesting expectations bondholders may be able to recover some value. Some [bondholders are mulling possible legal](https://www.financedigest.com/some-credit-suisse-at1-bondholders-seek-legal-advice-law-firms.html "Some Credit Suisse AT1 bondholders seek legal advice -law firms") action after their wipeout, one law firm said on Monday.

Graphic: A trip from above par to pennies – https://www.reuters.com/graphics/GLOBAL-HEDGEFUNDS/jnpwyjaoxpw/chart.png

![](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/209-1736814286613-compressed.jpg)

STABILITY?

European banking stocks rose 3.8%, [set for their biggest one-day gain](https://www.financedigest.com/londons-ftse-100-edges-higher-set-for-fourth-weekly-gain.html "London’s FTSE 100 edges higher, set for fourth weekly gain") since October, U.S. [bank stocks rallied](https://www.financedigest.com/asian-stocks-rally-as-bank-jitters-calm-alibaba-lifts-mood.html "Asian stocks rally as bank jitters calm, Alibaba lifts mood") 3.8%..

The cost of insuring exposure to [bank debt](https://www.financedigest.com/seven-out-of-ten-uk-adults-aged-25-44-never-seek-advice-on-dealing-with-debts-despite-depending-on-the-bank-of-mum-and-dad.html "Seven out of ten UK adults aged 25-44 never seek advice on dealing with debts despite depending on the bank of mum and dad") meanwhile fell.

UBS five-year credit default swaps (CDS) fell 36 bps to 128 bps from Monday’s close, while Credit Suisse CDS also edged down, S&P [Global Market Intelligence](https://www.financedigest.com/artificial-intelligence-goes-global-demand-for-ai-reaches-four-continents-in-three-months-new-figures-from-synechron-show.html "Artificial Intelligence goes global: demand for AI reaches four continents in three months, new figures from Synechron show") data showed.

The iTraxx Crossover Europe, which measures the cost of [insuring exposure to a basket of European corporate junk](https://www.financedigest.com/scratched-ev-battery-your-insurer-may-have-to-junk-the-whole-car.html "Scratched EV battery? Your insurer may have to junk the whole car") debt, eased 31 basis points (bps) to 474 bps from Monday’s close, the S&P data showed. The iTraxx subordinated financials index tumbled by 22 bps to 195 bps, and the iTraxx [senior financials](https://www.financedigest.com/financial-risks-of-climate-change-overplayed-senior-hsbc-banker-says.html "Financial risks of climate change overplayed, senior HSBC banker says") index was down 11 bps to 106 bps.

Invesco’s AT1 [Capital Bond exchange-traded fund](https://www.financedigest.com/galois-capital-flagship-fund-to-close-after-ftx-losses.html "Galois Capital flagship fund to close after FTX losses"), which tracks the value of AT1 debt, was flat having jumped over 2.5% earlier in the session and dropping sharply on Monday.

S&P Global Ratings said it did not believe the decision to write off [Credit Suisse AT1s would lead to material contagion risk for European banks](https://www.financedigest.com/explainer-what-are-credit-default-swaps-and-why-are-they-causing-trouble-for-europes-banks.html "Explainer-What are credit default swaps and why are they causing trouble for Europe’s banks?").

[“Traders will wait to see a bit more stability before they add more money](https://www.financedigest.com/how-much-money-do-forex-traders-make.html "How Much Money Do Forex Traders Make?") to these (bank) stocks. A lot of people just want to make sure that the contagion [fears abate before jumping back](https://www.financedigest.com/fear-of-failure-holding-back-british-entrepreneurs-new-research-finds.html "Fear Of Failure Holding Back British Entrepreneurs, New Research Finds") in,” said Patrick Spencer, vice chair of equities at RW Baird.

Some investors took comfort from the distinction between [rules governing AT1 bonds](https://www.financedigest.com/wall-st-stocks-fall-bond-yields-rise-as-china-drops-quarantine-rule.html "Wall St stocks fall, bond yields rise as China drops quarantine rule") in Switzerland and other jurisdictions.

You can’t [apply the Credit Suisse story to any other bank](https://www.financedigest.com/dutch-online-bank-bunq-applies-for-u-s-banking-licence.html "Dutch online bank Bunq applies for U.S. banking licence") because none of these other instruments have got the same sort of provision and the regulators now have come out globally saying hey, as far as we’re concerned, equity is first in line,” said Thomas Jacquot, head of research at fixed income broker FIIG in Sydney.

(Reporting by Tom Westbrook and Rae Wee in Singapore, and Chiara Elisei and Karin Strochecker in London; additonal reporting by Naomi Rovnick, Yoruk Bahceli and Francesco Canepa; Graphic by Nell Mackenzie; Writing by Dhara Ranasinghe, Editing by Jason Neely)


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