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Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

Potential returns from investing along <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc-a723bd63-0890-486f-aaa0-3bb9ad2b95ce" target="_blank" data-smartkarma-citation="entities:21976:1" rel="noopener">HSBC Holdings (HSBA LN)</a> Additional Tier 1 (AT1) curve vary considerably between its Euro, Sterling, Singapore- and US- dollar bonds; however, this difference is not entirely driven by the choice of currency. The Singapore-dollar denominated securities offer the highest yield-to-call at current price levels; however, the question is whether you will get what you pay for in yield terms.At the other end of the yield spectrum, HSBC’s Euro-denominated AT1 securities offer significantly less yield-to-call. The question here is whether HSBC’s credit risk is appropriately priced in these securities.Yields available on the Sterling and US dollar denominated securities are somewhere between that available on the Singapore-dollar and Euro-denominated bonds, and they generally trend upwards over time. However, that does not necessarily equate with value for money.We examine these securities from a credit and extension risk perspective towards determining which bonds may ultimately provide a higher return over time.

Potential returns from investing along HSBC Holdings (HSBA LN) Additional Tier 1 (AT1) curve vary considerably between its Euro, Sterling, Singapore- and US- dollar bonds; however, this difference is not entirely driven by the choice of currency. The Singapore-dollar denominated securities offer the highest yield-to-call at current price levels; however, the question is whether you will get what you pay for in yield terms.At the other end of the yield spectrum, HSBC’s Euro-denominated AT1 securities offer significantly less yield-to-call. The question here is whether HSBC’s credit risk is appropriately priced in these securities.Yields available on the Sterling and US dollar denominated securities are somewhere between that available on the Singapore-dollar and Euro-denominated bonds, and they generally trend upwards over time. However, that does not necessarily equate with value for money.We examine these securities from a credit and extension risk perspective towards determining which bonds may ultimately provide a higher return over time.

HSBC’s AT1 Curve: Where Is the Cross-Currency Value?