Marcus Ashworth, Columnist

A CoCo Bond at 3.375%? The Market's Still Crazy

Austria’s Erste Bank sold an AT1 for the second-lowest coupon on record for this type of risky debt. Investors are still ravenous for any yield.

January 23, 2020 at 7:00 AM UTC

By Marcus Ashworth

Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. Previously, he was chief markets strategist for Haitong Securities in London.

Erste’s debt issuers have been busy bees.
Photographer: Bloomberg

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It takes something special to really stand out in debt capital markets in 2020 when issuance has hit a new record, but Austria’s Erste Group Bank AG certainly caught the eye this week with a perpetual deal at an incredibly low yield of 3.375%.

It was the second lowest coupon on record for a so-called additional tier 1 regulatory capital bond, also known as a CoCo, which is an especially risky type of debt because the investor bears the losses if the bank fails. Even so, and despite the small yield, the 500 million-euro ($554 million) issue was more than 10 times subscribed.