Subordinated Financial Debt positioning in the current crisis

In this document we provide an update about the activity of the funds, as well an analysis of the situation.

  •  In the recent market correction, financial subordinated debt has fallen sharply in recent weeks to levels that we have not seen for a long time. Current spread levels are above 1000 bps on Legacy bonds and above 1400 bps on AT1/RT11 bonds (Solaxicc index) which is equivalent to a yield to maturity of over 7% in EUR.
  • The current crisis is an economic crisis and not a banking crisis: never before have European banks approached a crisis so well capitalized.
  • The exceptional measures announced by the BoE, the ECB and the SSM2 are extremely positive for the banking sector and more specifically subordinated debt.
  • In practice, in our view, banks are in a better place compared to corporates and are almost assured of not coming under significant pressure from the supervisory authorities if they were to face a stress scenario that would affect their capital.