Why CoCo bonds are the new blackSimon Fasdal
If you haven't heard of Coco bonds, you’re about to. That’s according to Saxo Bank’s head of Fixed Income, Simon Fasdal, who explains they are getting increasingly popular.
Coco is short for Contingent Convertible and these bonds are the next generation of banks' Hybrid Capital – hybrid being a mixture of debt and equity.
Simon explains these bonds are interesting because they offer a higher yield than normal bonds issued by banks. He says: “Recently we have seen new Coco bonds from BBVA, Santander and Danske Bank, and these were all heavily oversubscribed”.
But he warns investors to understand fully the Coco concept as the special structure and features in this bonds makes it more risky than normal bonds.
He explains that even though the "loss trigger" can seem far away, one can expect the bonds to be more more volatile than traditional bank hybrids.