Tuesday, June 11, 2024
Home News How AT1 wipeout could impact the global bond market

How AT1 wipeout could impact the global bond market

A type of debt instrument issued by banks to satisfy their Basel III capital requirements are AT1 bonds, also known as Additional Tier 1 bonds. These bonds are perpetual and have no expiration date. The issuer has the option of calling them or redeeming them at its discretion. They can, however, be written off or converted into equity if certain trigger events occur, making them high-risk instruments in the event of a bank’s financial distress. Because of this, they are more risky than senior bonds or deposits, which are typically secured by write-downs.

Investors who hold AT1 bonds could suffer significant losses if a bank writes off or “bails in” the securities. The bank’s other debt instruments, such as senior bonds or deposits, may see a selloff as a result of a loss of confidence in the bank’s ability to repay its debt.

The size and importance of the affected bank will determine how the elimination of AT1 bonds affects the global bond market. The impact can be significant and widespread if the bank is substantial and systemically significant, such as a global investment bank. As a result, investors may be more wary of AT1 bonds and banks may be forced to offer higher returns to offset the increased risk. Banks and other issuers could see their borrowing costs rise as a result of this, which could result in a risk reevaluation in the bond market.

The riskiest bonds issued by Credit Suisse, Additional Tier 1 (AT1), are subject to losses of up to $17 billion, which has the potential to destabilize Europe’s $275 billion bond market. Other regions may experience a cascading effect as a result of this. The Credit Suisse meltdown of AT1 bonds is not the first such crisis. Yes Bank in India failed to repay its AT1 bondholders in 2020, resulting in losses of approximately $1.3 billion, highlighting the risk that investors face when investing in such instruments.

Retail investors should be especially aware of the dangers of investing in AT1 bonds because they can lose a lot of money in the event of a bank financial crisis, as Credit Suisse and Yes Bank have shown, and they aren’t as safe as they thought. Before investing in such instruments, investors ought to seek the advice of a professional or conduct adequate research.”

GoldenPee Technologies’ CEO and co-founder is Mr. Abhijit Roy.


Markets end FY23 in style; Sensex Nifty rally nearly 2% on firm global trends

Market, The final day of the fiscal year 2022-23 saw gains for benchmark indices, with a gain of nearly 2% on Friday, extending gains for...

Day trading guide for today: 6 stocks to buy or sell on Friday — 31st March

Trading, Day trading guide for today: Indian shares gained on Wednesday as global markets' increased risk appetite was aided by easing in the banking industry....

Financial, IT stocks aid Indian shares snap three-month losing streak

Financial, By Bharat Rajeshwaran BENGALURU (Reuters) - Indian shares rose on Friday, supported by a higher weighting of financial stocks and information technology (IT) stocks,...


Please enter your comment!
Please enter your name here


Most Popular

Trading the Inside Bar Pattern on Pocket Option Platform

Inside Bar Pattern Introduction Price movement on a chart is examined in price action trading. You may use candlesticks to predict where prices will move...

“Unlocking the Secrets: 4 Tricks of Successful Traders on Pocket Option Platform”

For a year, I have been trading on the Pocket Option platform. I sometimes succeed and sometimes fail. However, I was confident that if...

Identifying Mistakes That Lead to Losses on Pocket Option

Why do people lose their money when trading binary options New traders frequently take a significant financial risk while trading binary options. As a result,...

Weekly Income Plan on Pocket Option Platform”

Get weekly returns on Pocket Option It turned out that October was a terrific month for me. I am still able to generate money every...

Recent Comments