Yields on Deutsche Bank CoCos rise to more than 13%
Investors feel pain as yields soar from 7.5% at start of year while shares plummet 40% in same period
London
WHEN European regulators created a new type of bank debt, the idea was to transfer risk from taxpayers to investors. Now, bondholders are learning what that really means.
Yield-starved investors bought US$102 billion of the contingent convertible bonds (CoCos), securities created to help troubled banks hang on to cash in times of stress by skipping coupon payments without defaulting and converting the debt to equity or writing it down. Even though neither of those has yet happened, investors are already feeling the pain, as yields on Deutsche Bank AG's 4.6 billion euros (S$7.2 billion) of CoCos have soared and its shares have plummeted.
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