Subordinated debt enters negative territory this year
9 APR, 2026
Paul Gurzal, Co-Head of Fixed Income, and Jérémie Boudinet, Head of Financial and Subordinated Debt at Crédit Mutuel AM
Subordinated debt has entered negative territory year-to-date, with a notable decline linked to the uncertain consequences of the geopolitical conflict in Iran and its effects on inflation, which are already beginning to be felt. In March, the iBoxx indices for euro-denominated subordinated debt recorded declines of -2.5% for CoCos, -2.2% for insurer Tier 2, and -2.1% for corporate hybrids.
Spread widening was relatively moderate, with +49 basis points (bps) in CoCos (Bloomberg index), +28 bps in corporate hybrids, and +18 bps in insurer Tier 2, while the Yield to Worst (YTW) increased to 5.9% for CoCos, 4.8% for corporate hybrids, and 4.2% for insurer Tier 2.
There are no signs of panic in the subordinated debt market. Liquidity remained reasonably solid throughout March, supported by the perception of limited flows. Prices declined, but in a controlled and orderly manner, without notable stress episodes.
CoCos once again showed strong resilience, now trading more in line with BB-rated High Yield corporate bonds, while the B-rated High Yield segment saw a more pronounced widening of spreads (+70 bps in March, to 438 bps, compared with 309 bps for CoCos as of March 31). This resilience reflects both a more normalized perception of risk and the growing weight of RT1 insurer bonds, which now account for more than 20% of the market.
Another sign of the absence of real stress: the primary market remained active despite volatility. Stellantis entered the hybrid market for the first time with a €5 billion issuance in three tranches, which was heavily oversubscribed. SES S.A. also launched “SPACE Hybrids,” successfully placed at a yield of 7.625%.
In the AT1 market, HSBC issued two USD tranches and Danske Bank one, both attracting solid demand with coupons in the 6.5%–7% range. In euros, Aktia placed €80 million with a 6.75% coupon.
Data sources: Markit iBoxx, Bloomberg, Crédit Mutuel Asset Management. Data as of 31/03/2026.
