What’s the canary in the overpriced-asset coal mine? Perpetual additional tier one bonds

 




One obvious tweety bird is the riskiest type of bank debt, known as perpetual additional tier one bonds. 

These securities allow regulators to wipe out investors if a bank fails, but to compensate they offer the highest yields for lending to financial firms. 

The European bank stock index is up more than 240% since the demise of Credit Suisse Group AG in March 2023, when $17 billion of its AT1 bonds were zeroed. 

There's a lot more of a capital buffer before we approach anything like the euro crisis of more than a decade ago, which spawned these instruments. 

Regulators have fought hard to persist with the AT1 regulated debt structure to absorb capital losses. 

It may not be perfect but it's here to stay as switching to any alternatives would be too disruptive for debatable benefits.

Marcus Ashworth Bloomberg October 8, 2025

https://www.bloomberg.com/opinion/articles/2025-10-08/risky-bank-debt-is-rationally-exuberant


Understanding Tier 1 Capital

https://www.investopedia.com/terms/t/tier1capital.asp


Credit Suisse Default Swaps Near 2009 Level

https://englundmacro.blogspot.com/2022/10/credit-suisse-default-swaps-near-2009.html


Roubini Says Credit Suisse Might Be 'Too Big to Be Saved'

https://englundmacro.blogspot.com/2023/03/roubini-says-credit-suisse-might-be-too.html

 

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