UBS AT1

[Jwdool]

So, this is an interesting note: CH0271428333

It is a 7% AT1 security - which isn't too popular after the CS debacle over the weekend. The thing is, UBS isn't CS. The interesting thing about this particular note is that it is very likely to be called in Feb 2025. The reason for this is because of the change in regulations in Switzerland which essentially says low trigger paper is inadequate for CET1 calculations post first call. The first call being February 2025.

The bonds are currently trading around 91, so not only would you continue picking up 7% on-going, you'd also now get 9 points. The over all YTM if Feb 25 happens? Around 11.5% in probably the world's safest bank with the world's largest deposit base. A bank which just received around 54bn CHF in additional capital at a cost of around 3bn CHF. If UBS has to trigger this note, then I'm afraid it's goodnight Vienna for the global financial system, so I guess the risk factor is a little like writing end-of-the-world insurance.

It's not for everyone, but I think its a great trade. I'd also suggest that UBS shares are likely to double in the next 12 months given the capital additions, but that's another story.

[88V8]

So, this is an interesting note: CH0271428333
It's not for everyone, but I think its a great trade. I'd also suggest that UBS shares are likely to double in the next 12 months given the capital additions, but that's another story.

Frankfurt.
Minimum clip US$200k nominal so would be unbalancing for me, but as you say looks a great buy. Up 3% already today, better be quick.

V8

[hostye]

If you think the Equity price is going to double in the next year then why would you bother buying AT1 for a potential 11.5% yield when you can get 100% buying the equity?

[Jwdool]

They are different types of risk. The AT1, in my view, is pretty good returns given the risk. The equity will perform better in absolute terms - in my view, but comes with more risk.

[hiriskpaul]

UBS capital instruments are here for anyone interested: https://www.ubs.com/global/en/investor- ... ntent.html

For the 7% with CET1 trigger < 5.125% I make YTC about 12.4%, so yes I agree it looks reasonable. The difficulty I would have is that none of my brokers would allow me to buy it! I stopped using a full service broker some time ago and I think it unlikely I would be able to buy even if I approached one due to the FCA ban on retail investors buying this sort of stuff.

An IT might be an interesting possibility though. Anyone know which ones hold AT1?

[Holts]

UBS capital instruments are here for anyone interested: https://www.ubs.com/global/en/investor- ... ntent.html

For the 7% with CET1 trigger < 5.125% I make YTC about 12.4%, so yes I agree it looks reasonable. The difficulty I would have is that none of my brokers would allow me to buy it! I stopped using a full service broker some time ago and I think it unlikely I would be able to buy even if I approached one due to the FCA ban on retail investors buying this sort of stuff.

An IT might be an interesting possibility though. Anyone know which ones hold AT1?

I have been watching Ivz At1 Capbond (AT1) ETF .

Same problem using online brokers access restricted , although can buy the above through II .

[hostye]

They are different types of risk. The AT1, in my view, is pretty good returns given the risk. The equity will perform better in absolute terms - in my view, but comes with more risk.

They are different instruments agreed but both are bank capital instruments and carry high risk. AT1 holders should normally rank above equity but as we just saw with Credit Suisse AT1, holders have been wiped out whilst equity holders still received circa 3bn chf. Swiss AT1 have full write down clause which makes these as risky or more risky than equity in my view. Certainly, if you believe UBS equity will double in a year (as you mentioned in you original post) then the returns will on equities will be multiples of the AT1 bond with very similar high risk. This is why the institutional market is pricing them this way as they have now learnt Swiss AT1 has different write down characteristics to other European and UK AT1

[Jwdool]

I think the equity risk is different from the AT1 risk for a number of reasons. It is entirely possible that UBS find a bunch of things on the CS balance sheet which impair profitability - or cause operating problems. Its equally possible that there is a general equity downturn leaving the equity price vulnerable.

The AT1 risk is different in the sense the coupon will be paid in all weathers apart from catastrophe. My sense is that this risk isn't likely in the case of UBS and therefore the returns being offered at current levels are attractive - because I don't see anywhere near the same sorts of risks to those notes that I can see for the equity price. Granted, in my view UBS has just pulled off deal of the century - with CS, but that could be wrong, the shares could fall and the AT1 could still get fully paid out.

[BondSquared]

Which UK retail broker allows you to buy AI1s like this? AJBell won't, desppipte Professional Investor classification.

[GoSeigen]

Lemon Fool investors: Atrocious behaviour wiping out AT1s but leaving shareholders whole! Investors will ever buy AT1 paper again.
Also Lemon Fool investors: Which brokers sell AT1s? Gotta buy some urgently.

GS

[88V8]

Lemon Fool investors: Atrocious behaviour wiping out AT1s but leaving shareholders whole! Investors will never buy AT1 paper again.
Also Lemon Fool investors: Which brokers sell AT1s? Gotta buy some urgently.

Haha, yes that's what makes a market

V8

[BondSquared]

Not atrocious behaviour at all, the Swiss have behaved very rationally, protecting the domestic taxpayers. They've also tanked the global AT1 market which makes for great investment opportunities. If anything I find the BoE and ECB statements cringeworthy. if the facts are facts then they don't need to be clarified.

[BondSquared]

Which UK retail broker allows you to buy AI1s like this? AJBell won't, despite Professional Investor classification.

any suggestions?

[Jwdool]

Try Interactive Brokers (IBKR).