AT1 bonds: higher risk, higher yields4 min read . Updated: 22 Sep 2016, 11:45 AM IST
These are perpetual bonds, and in sense a bit like equity. The returns are better than those of secured bonds, but there is risk of capital loss as well
In an attempt to comply with Basel III norms to have higher tier I capital by financial year (FY) 2019, many public sector banks have raised capital through perpetual bonds, better known as AT1 bonds or additional tier 1 bonds. These have higher rates than tier II bonds. While a AAA-rated tier II bond of a public sector bank may have an interest rate of 7.5% per annum, its AT1 bond can carry a rate of around 9% per annum.
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