Investors are going loco for CoCos

In a distantUBSAT1 AT1AT1 and forgotten era, around eight months ago, tremors were rippling through the global banking system. Three mid-sized American lenders collapsed in a week. In Europe the venerable Credit Suisse almost went under, before being bought by its rival, . The scramble to merge them threw a cloud over an entire class of bank debt, $1trn of which has been issued over the past decade.bonds were supposed to make banks safer after the financial crisis of 2007-09. In good times, they work like normal bonds. But if the issuing bank’s capital falls far enough, some (dubbed contingent convertible notes, or “CoCos”) convert to equity. Some others are written off. s are usually described as being senior to shares and junior to bonds in a liquidation. But when Credit Suisse fell apart, bondholders were wiped out before shareholders.