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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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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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Global bond markets are undergoing significant turbulence as yields climb toward critical thresholds, driven by persistent inflation, political instability, and mounting government debt. These shifts reflect the ‘higher for longer’ phenomenon, which is reshaping borrowing costs and investment strategies worldwide. This blog explores the investment opportunities arising from these dynamics, offering actionable insights for navigating today’s complex 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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