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All banks’ highest quality capital is supposed to be permanent or perpetual. However, many bank regulators around the world allow banks to issue Additional Tier 1 Capital, colloquially known as ‘Coco’ bonds, as part of this capital base. These bonds are perpetual, but the bank has the option to call them after a specified period, typically five, seven or 10 years. These securities therefore tend to trade to the call date, and not to perpetuity, as investors rightly or wrongly assume that the banks will probably call and refinance these securities. The banks are under no obligation to do this, and some have said that that they would only do so if it was in their economic interest come the call date.

In our latest video Chris Bowie looks at the performance of the Outcome Driven strategy in 2018 and looks forward to 2019.

In our latest video Eoin Walsh looks back at performance for 2018, and provides outlook for the year ahead.

The year 2018 will go down in the history books as one of the most challenging we have faced in recent times, with price action in the fourth quarter being particularly brutal and difficult to respond to. When we wrote our outlook for 2019 at the start of December, we were reasonably cautious and felt it possible that prices could dislocate from fundamentals during the year, if markets started to price in the increasing likelihood of a more meaningful downturn or recession in 2020. We were not expecting this to happen in December, but it did, and it has left investors wondering whether this is the beginning of the end of the cycle, and whether months like December will be commonplace in 2019.

“…everybody’s having fun. Look to the future now, it’s only just begun.”

The dust is slowly settling after Wednesday’s FOMC rate decision, and more importantly the following press conference where Chairman Jerome Powell literally talked the market down.