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AT1 CoCos proved their maturity in 2025, absorbing record issuance with resilience. Looking to 2026, the value proposition lies in high coupons, with AT1s offering attractive yields and exposure to a stable, well-capitalised European banking sector.
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AT1 CoCos proved their maturity in 2025, absorbing record issuance with resilience. Looking to 2026, the value proposition lies in high coupons, with AT1s offering attractive yields and exposure to a stable, well-capitalised European banking sector.
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AT1s have matured into a resilient core asset class. Strong issuance, stability during stress events like Liberation Day, and attractive yields around 6% yield-to-worst make CoCos appealing for investors seeking higher income and diversification within their fixed income allocation.
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AT1 CoCo bonds offer strong yields near 400 bps amid market uncertainty. Backed by well-capitalised banks with low credit risk and limited tariff exposure, they present a resilient investment opportunity in today’s volatile economic landscape.
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CoCos have seen strong demand in the last few times with few issues subscribed more than 10x. The “pull-to-par” effect, along with strong fundamentals, has revived and boosted investor confidence. European CoCos have outperformed other relevant peers since inception despite weathering storms like COVID-19 and the fall of Credit Suisse.
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Recent trends in the CoCo bond market can be characterised by a notable tightening of spreads, driven by the consistent behaviour of issuers calling bonds at par, the recovery of prices following the Credit Suisse event, a favourable monetary environment, and the absence of significant adverse macroeconomic effects.
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The global financial landscape has undergone significant transformations in recent years, reshaped by various macroeconomic factors. Among the most impactful changes has been the steady climb of interest rates, a trend that has both challenged and benefited different sectors of the economy. Understanding the nuances of these shifts within the banking sector is crucial in the context of AT1 CoCos.
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