Investors ignore reset risk to take AT1s into a spread universe

AT1
By Jasper Cox
23 Nov 2017

Nordea beat the record for the lowest coupon on an additional tier one (AT1) bond in a core currency by some margin on Tuesday, pricing its deal at 3.5%. It had market participants wondering whether AT1 prices should be marketed at a spread over the base rate rather than as a coupon. At the same time, some said investors are showing complacency over the reset spread and call optionality they give issuers, writes Jasper Cox.

Lead managers brought in the pricing from initial thoughts of 4%-4.25% and the final order book stood at more than €5bn. The previous tightest coupon on AT1 in dollars, euros or sterling was 4.75%. The bond was trading at 100.671 on Thursday, according to MarketAxess.

“There are ...

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