Flight to AT1 from high yield expected; tier 2 needed to mitigate ALAC impact.

New AT1 deals from Chinese and UK challenger banks; TLAC securities “must appeal to fixed income investors”

A November rush to market is anticipated, but there are signs of a flight to quality by investors.

Lloyds LME highlights potential risks to investors of early regulatory calls in the booming AT1 market

Lloyds’ liability management exercise (LME) highlights the potential risks to investors of early calls.

Overwhelming demand for a string of bank AT1 deals shows the extent of investors’ desperation for yield as much as their faith in the restored health of the banking sector. As more new investors accept these deals, hopes grow that a €150 billion AT1 market might emerge quickly now. But terms have tightened far and fast and AT1 can be volatile.

€31 billion AT1 needs to be issued by end-2014; Benchmark inclusion key to future appetite