Hybrids – Bond highs with equity’s lows

08 Mar 2017

Adam Daman, Credit analyst – Cash, Fixed income and Currency 

Following the global financial crisis, bank regulators have been working with governments around the world to increase the stability of the financial system. One notable change has been to make it easier to recapitalise stressed banks prior to failure by bailing-in junior creditors, such as hybrid investors. As these measures come into effect, they translate into new features for ‘new-style’ hybrids. In this paper we have updated the findings from our 2010 research paper titled “Hybrid Securities: Lured by Yield.” This updated research continues to support our original findings that hybrid instruments have a return profile that will yield the upside of a bond, with the downside of equity and are therefore not a substitute for a fixed income investment.

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