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The yield premium of UBS’s AT1 bonds over its non-Swiss peers has vanished now, after having spiked following its acquisition of Credit Suisse. For instance, during the height of the crisis, UBS’s 4.875% Perp offered a 420bp premium over its comparable non-European peers as per Bloomberg. However, now this spread has vanished and is roughly in-line with what was seen in 2022, much before the Credit Suisse saga emerged. Given the repricing, analysts expect that UBS may stage a comeback to the AT1 markets. In August, Bloomberg had initially reported that UBS was considering its first AT1 sale since its CS acquisition before the first call dates on two notes came due. “There are expectations that Swiss authorities will not repeat what they did to CS AT1 holders. Investors are being on their qui vive now, reading the prospectus from A to Z and being better informed more generally”, said Joost Beaumont, head of bank research at ABN AMRO.
In the table above, we compare UBS’s 4.875% Perp with comparable European AT1s over the last three quarters. As seen in the table, the YTC on UBS’s 4.875% Perp was 10.2%, roughly in-line with peers. On the other hand, we can also see that the YTC was at 12.4% in end-March, offering a much higher premium over comparable peers.
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