HSBC has decided to redeem its $1.95bn of its discounted perpetual bonds/discos issued in the 1980s. The bonds in question are its $300mn 5.251% Perp and $750mn 5.401% Perp callable in June, a $500mn 5.459% Perp callable in September and its $400mn 5.013% Perp callable in April. These bonds were grandfathered as Tier 2 capital until 2025. These bonds were trading at ~72 cents on the dollar at Monday’s open but after the announcement were trading almost at par, as per Tradeweb. Analysts noted that the bonds could have offered HSBC attractively priced funding for perpetuity if they remained outstanding but the notes coupons were hitched to US LIBOR that is being phased out. In May 2018, HSBC had categorized these notes as Tier 2 notes and had upset some bondholders, given than some had hoped that the bank would either call the bonds. A year later, HSBC grandfathered these notes until June 2025.

Separately, StanChart has also redeemed $1bn of its 7.75% AT1 bond at par, that were callable on April 2. Analysts note that issuing new AT1s could be very expensive until the market regains confidence following the Credit Suisse saga. StanChart has not commented on whether it is planning to issue new AT1s or not.

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