(Harvest) Yield-hungry investors are quickly regaining their taste for deeply subordinated bank bonds. Some of these securities offer appetizing yields, but it’s important not to overindulge.
Deeply subordinated bonds issued by Europe’s banks to satisfy tougher regulatory requirements are one of the region’s trendier investment opportunities. The regulatory framework that emerged after the global financial crisis forces banks to hold a minimum level of common equity capital. On top, banks must hold various tranches, or tiers, of debt capital with different layers of subordination that are intended to soak up losses if banks run into trouble.
