Yields on AT1 bonds shoot up in secondary market on MFs' liquidation move

Yields on perpetual bonds issued by banks have shot up in the secondary market as mutual funds (MFs) — the primary investors in these bonds — jostle to sell the papers to avail of liquidity.   Banks had issued these bonds as additional tier 1 (AT1) bonds to raise capital in the past. These bonds have a clause that if the issuer is going through financial constraints, the issuer may choose to not honour the bonds. This is precisely what happened with YES Bank in mid-March when it said AT1 bondholders won’t get their money back.   Now, most of such bonds a.....

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