Investors choose safer bank bonds as AT1 opportunity wanes

Technical factors mean senior bank bonds now offer relative value

Last year’s banner trade was to buy bank regulatory capital bonds as prices tumbled after the failure of Credit Suisse. Eighteen months on, that opportunity has faded. And investor interest has turned instead to bonds at the other end of the bank capital stack.

The safest types of European bank bonds are trading cheap relative to riskier instruments as a slowdown in central bank buying amid other factors insulates them from the broader rally across the sector.

Spreads on all tiers of bank debt