CoCos Lose Favor as One of 2019’s Hottest Trades Starts to Cool
- Bond buyers cut AT1 holdings to multi-year lows, Citi says
- Morgan Stanley, UBS advise investors to reduce holdings
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Investors are beginning to get nervous about one of this year’s best performing trades -- risk-laden bank debt.
Credit investors have cut holdings of Additional Tier 1 bonds, also known as CoCos, to near multi-year lows, according to a Citigroup Inc. survey, even as they add other notes on the promise of future central-bank easing. The reduction ahead of the summer slowdown comes after mixed-currency European CoCos generated total returns of 13% this year, trouncing other forms of credit, based on Bloomberg Barclays indexes.