Credit Suisse AT1 Bonds

[Dash man]

I am soooo glad I didn’t hang on to a Credit Suisse bond I bought last year! It looks like they are writing them off to zero.

[lawman]

Quote:

Originally Posted by Dash man I am soooo glad I didn’t hang on to a Credit Suisse bond I bought last year! It looks like they are writing them off to zero.

Is that true for individual investors?

[Dash man]

Quote:

Originally Posted by lawman Is that true for individual investors?

Here’s the link to the article I read about it. I didn’t see any differentiation for individual investors.

https://www.wsj.com/articles/credit-...arket-10be7d04

[Dash man]

Quote:

Originally Posted by lawman Is that true for individual investors?

It’s for a special type of bond called AT1 bonds. I can’t confirm that’s what I had, but the description sounded like it.

There’s a similar discussion going on in the “Golden Period” thread if you want to check it out.

[Spock]

Quote:

Originally Posted by Dash man It’s for a special type of bond called AT1 bonds. I can’t confirm that’s what I had, but the description sounded like it. There’s a similar discussion going on in the “Golden Period” thread if you want to check it out.

You didn't have AT1s. They are only available to other banks, funds, and other whales only.

[bobandsherry]

Quote:

Originally Posted by lawman Is that true for individual investors?

Yes, these were COCO bonds. Info here.

https://www.google.com/amp/s/www.mar...-zero-634a65e5

[bobandsherry]

Quote:

Originally Posted by Spock You didn't have AT1s. They are only available to other banks, funds, and other whales only.

Not true, as mentioned in the article link.

Most of the demand for CoCos in recent years has come from private banks and retail investors, especially in Europe and Asia, along with big U.S. institutional investors who were attracted by the higher yields in the low-interest-rate environment that prevailed from the crisis until the Federal Reserve started raising interest rates last year.

https://www.google.com/amp/s/www.mar...-zero-634a65e5

[pb4uski]

Quote:

Originally Posted by Dash man It’s for a special type of bond called AT1 bonds. I can’t confirm that’s what I had, but the description sounded like it. There’s a similar discussion going on in the “Golden Period” thread if you want to check it out.

Quote:

Originally Posted by Spock You didn't have AT1s. They are only available to other banks, funds, and other whales only.

Are you saying Dash man is a minnow and not a whale?

[Spock]

Quote:

Originally Posted by pb4uski Are you saying Dash man is a minnow and not a whale?

Apparently I'm wrong, but I did not think something as sophisticated as hybrid AT1 bonds, intentionally "designed as a part of total loss-absorbing capacity (TLAC) bonds to provide a 'bail-in' or a way for banks to transfer risks to investors" would be something that would show up on Fidelity's bond search tool for retail investors.
I have to tweak my investor profile for the Fidelity search tool to show me below-investment-grade (BBB-) bonds. I wonder what switches you have to throw to get AT1's... I would imagine it would be a grade above qualified/accredited investors.

[Dash man]

Quote:

Originally Posted by pb4uski Are you saying Dash man is a minnow and not a whale?

My scale would say otherwise! [emoji23]

[pb4uski]

Quote:

Originally Posted by Dash man My scale would say otherwise! [emoji23]

Funny!

[Freedom56]

Retail investors in the US can only buy AT1 bonds through ETFs. CS bonds/Notes will transfer to UBS. UBS has an issuer rating of AA- with a negative watch after the merger with CS. The rating for UBS is higher than most high grade bonds. Fitch also put CS bonds on "evolving watch" (RWE) which means:

"The RWE reflects the heightened likelihood that the ratings will be upgraded if the bank's merger with UBS Group AG proceeds as planned, because the resulting business combination will likely result in improvements to Credit Suisse's franchise and business model, risk management and funding and liquidity profiles. The transaction is expected by UBS to close in 2Q23. The RWE also signals the risk of a downgrade should the transaction fail."


https://www.fitchratings.com/researc...ger-21-03-2023

https://www.fitchratings.com/researc...sse-21-03-2023

[copyright1997reloaded]

For your amusement/concern, biggest holders of CS AT1 "Bonds"
https://t.me/tradingrumors/50508

[Spock]

Quote:

Originally Posted by copyright1997reloaded For your amusement/concern, biggest holders of CS AT1 "Bonds" https://t.me/tradingrumors/50508

Maybe it displays better in the telegram app but I couldn't read any of it.


I did read a couple of articles last night that suggested several items, the biggest of which was the insurance and pension fund exposure to AT1s. All of the institutions were already taking hits in the NBV of their treasuries after rates rose, but they supposedly have significant exposure to AT1s which are suddenly unloved. The gist of the article was "buckle up. the default+bailout ride is just getting started".

[copyright1997reloaded]

Quote:

Originally Posted by Spock Maybe it displays better in the telegram app but I couldn't read any of it. I did read a couple of articles last night that suggested several items, the biggest of which was the insurance and pension fund exposure to AT1s. All of the institutions were already taking hits in the NBV of their treasuries after rates rose, but they supposedly have significant exposure to AT1s which are suddenly unloved. The gist of the article was "buckle up. the default+bailout ride is just getting started".

A little better on the tweet bird: https://twitter.com/runews/status/16...131485186?s=20

[Go-NoGo]

Thanks for posting.

Zoomed in and grabbed a screenshot. I see Cohen and Steers, PIMCO, Nuveen, and Invesco a lot in there. Looks like all the "smart" money got burned.

[Freedom56]

If you want more details here are the list of AT1 notes that were reset to zero.

https://www.credit-suisse.com/about-...struments.html

If you want to know who are the owners, use the ISIN number on the right hand side and Google: fintel <ISIN Number>

For example:

fintel US225401AS71

Gives you:

https://fintel.io/so/ch/225401as7

and so on...

https://fintel.io/so/ch/225401ar9

https://fintel.io/so/ch/225401al2

What you will find is preferred funds, bond funds, and insurance trusts are the owners but they lost "other peoples money" not their own.

[copyright1997reloaded]

Quote:

Originally Posted by Freedom56 If you want more details here are the list of AT1 notes that were reset to zero. https://www.credit-suisse.com/about-...struments.html If you want to know who are the owners, use the ISIN number on the right hand side and Google: fintel <ISIN Number> For example: fintel US225401AS71 Gives you: https://fintel.io/so/ch/225401as7 and so on... https://fintel.io/so/ch/225401ar9 https://fintel.io/so/ch/225401al2 What you will find is preferred funds, bond funds, and insurance trusts are the owners but they lost "other peoples money" not their own.

Freedom, thanks for posting this. One of the issues for us "little guys" who were never or are no longer in the business is access to heavy duty research tools (like a Bloomberg terminal). A lot of it is out there, we just don't know how to find it.

The resources provided in this thread and others is a great thing about ER.org.

[Go-NoGo]

New AT-1 issuance is pretty much dead for now. No one is going to buy these bonds after the Swiss debacle.

Credit Suisse fallout threatens to halt issuance of risky bank debt
https://www.ft.com/content/3f405e6d-...a-3ec9cf4f7054

Quote:

The fallout from the Credit Suisse deal “changes the whole nature of the [AT1] market, and I think the ability to issue going forward is probably close to zero”, said Greg Peters, co-chief investment officer of PGIM Fixed Income. “Basically, it’s a zombie market going forward in my mind.”

As the old adage goes, “People should be more concerned with the return OF their principal than the return ON their principal.”

[Freedom56]

Quote:

Originally Posted by Go-NoGo New AT-1 issuance is pretty much dead for now. No one is going to buy these bonds after the Swiss debacle. Credit Suisse fallout threatens to halt issuance of risky bank debt https://www.ft.com/content/3f405e6d-...a-3ec9cf4f7054 As the old adage goes, “People should be more concerned with the return OF their principal than the return ON their principal.”

It doesn't change the fact that there are still $275B in AT1 debt lurking in funds.