Yields on Deutsche Bank CoCos rise to more than 13%

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.