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The European financial institution debt market was bolstered by sturdy demand for a brand new issuance from Barclays on Wednesday, per week after UBS re-entered the market with the most important sale of extra tier-one bonds for 5 years.
UK lender Barclays acquired greater than $13bn of demand from buyers for an AT1 bond that might be redeemed in June 2030, in line with an investor. The yield on the debt was revised right down to about 9.6 per cent from 10.5 per cent because of the sturdy demand.
The marketplace for AT1s — that are designed to transform to fairness or be written down ought to banks run into bother — was hit laborious in March with the collapse of Credit score Suisse, which resulted in $17bn of AT1s being worn out.
Traders have been at first cautious of returning to the market after the most important losses on the merchandise since they have been launched following the worldwide monetary disaster.
However banks, together with BNP Paribas in France and BBVA in Spain, have slowly begun issuing AT1s and located keen consumers. Final week, Société Générale turned the most recent lender to re-enter with a $500mn providing.
Analysts have been eagerly awaiting the primary AT1s issued beneath Swiss legislation as a take a look at of investor urge for food, provided that it was the choice by the nation’s monetary regulator, Finma, to put in writing down the Credit score Suisse bonds that proved so controversial.
The transfer has led to at the least $9bn of authorized claims after bondholders argued that strict situations of their contracts that triggered the wipeout weren’t met.
But UBS acquired $36bn of demand for the $3.5bn bond concern final week, main the financial institution to decrease the yields on supply to 9.25 per cent from the greater than 10 per cent initially mooted.
That marked the most important sale of AT1 bonds by a European financial institution since March 2018, LSEG information reveals, and one of many prime 5 on document.
“The AT1 demand was unbelievable,” UBS chief govt Sergio Ermotti instructed CNBC on Wednesday. “Confidence is restoring not just for UBS, I might say additionally it’s a sign to the Swiss monetary system.”
The UBS sale lifted AT1 borrowing this yr to $53.5bn, in line with information from LSEG — down significantly on the earlier 4 years so far, however above 2018’s determine of $49bn.
Analysts mentioned the asset class’s rebound was helped by the European Central Financial institution and the Financial institution of England swiftly reassuring buyers that they might not undergo the identical destiny as these holding nugatory positions in Credit score Suisse debt.
“The AT1 market generally has recovered very considerably and I believe buyers are very snug with the regulatory regime in Europe and the UK,” mentioned Tim Kurpis, portfolio supervisor for US investment-grade credit score at AllianceBernstein.
Barclays declined to remark.
Extra reporting by Stephen Morris