These are hybrid bonds that absorb losses when the capital ratio of the issuer
falls below a trigger level
BBVA and Santander capital ratios (CET1 ratio: 10.5%-11%) are far from the
trigger on these Cocos (5.125% for both)
Coupons are discretionary and step up to a spread over Sy swap rates if these
are not called (in 2019)
The likely step up in coupon if these are not called incentivises the issuer
to call the bonds
we therefore look at 'yield to call' instead of 'yield to maturity'
BBVA (Baa2/BBB-) USD 9% CoCo Yield to Call
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SANTAN (Baal/BBB+) EUR 6.25% CoCo Yield to Call
« image 2 »(
Tazia Smith
Director
Key client Partners - US
Deutsche Bank Securities, Inc.
Deutsche Asset & wealth Management
345 Park Avenue - 26th Floor
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