Hi , I have owned a fair amount of the bank debt instruments since NABHA days , but always uneasy about the tier 1 terms. Sold the 10% of my portfolio that was left in them ,after Credit Suisse. No matter what anyone ''says '' , the terms are what are actually written down. They can be written down to zero at the whim of regulators. The Credit Suisse tier 1 's should have returned 25 to 30% on the dollar to the bond holders. Instead , to sweeten the pot for the bailout , that money was given to shareholders. In my view the risk makes them mis-priced. The argument that it could never happen here , is true , right up until it does.
These days , I concentrate on debt instruments that get paid before equity. Or just take the extra yield that the equity brings.
cheers
CBA Price at posting:
$97.50 Sentiment: Hold Disclosure: Held
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