Tasos Vossos

The decision by Australia’s banking watchdog to phase out Additional Tier 1 bonds marked the end of local lenders issuing the riskiest type of bank debt. Big international banks are now moving in to fill the void.

"You have the government balance sheet that's deteriorated over time, and you have corporate balance sheets that, in a lot of cases, have been improving and remain strong and stable," said Kelly Kowalski, head of investment strategy at MassMutual. "For this narrative to shift, you would have to get to a point where the rise in yields causes fundamental economic damage," she added. But, for now, "I think this is when the yield buyers come in and people start to think about extending duration."

As big tech companies raise hundreds of billions of dollars to fund artificial intelligence investments, Wall Street banks are increasingly finding they have to trade more credit derivatives to keep doing business with the hyperscalers.

The surge in activity is creating an opportunity for hedge funds to profit from banks' growing demand for these instruments.

Banks are going big on a product that’s drawing ever-closer regulatory scrutiny.

Banks are going big on a product that’s drawing ever-closer regulatory scrutiny.

(Bloomberg) -- European lenders are selling Additional Tier 1 bonds with long call dates at a record pace, seizing ultra-favorable conditions in the market for risky bank debt to fix costs for a decade. Most Read from BloombergSingapore Hands Byju's Founder His First Ever Jail TermIran’s Khamenei Says No Going Back for Middle East Rocked by WarTwo More Oil Supertankers Exit Hormuz to Help Push Up FlowsEx-President Biden Sues to Stop DOJ Sharing Interview Tapes‘KPop Demon Hunters’ Studio Draws Te

(Bloomberg) -- European lenders are selling Additional Tier 1 bonds with long call dates at a record pace, seizing ultra-favorable conditions in the market for risky bank debt to fix costs for a decade.

UBS Group AG is set to raise Additional Tier 1 capital in US dollars, its first foray into the market since Switzerland paused plans to tighten rules on the riskiest type of bank debt.

UK-based investors pulled money from cash funds and piled into bonds last month, enticed by surging yields, according to fund flow data compiled by Calastone.