Moving up the capital structure provides value

ON BONDS

BRYN JONES, manager of the Rathbone Ethical Bond fund on Bonds

For more information on Rathbones, search Adviserhound.com Basel III, the global agreement on new capital requirement rules for banks, was brought in recently. The basic idea is to ensure that the banks are adequately insulated in the event of another credit crisis. These rules make it difficult for banks to use existing Tier 1 core capital (the highest yielding, highest risk bonds in a bank’s capital structure) for solvency purposes. The announcement led to an impressive rally in Tier 1 bonds, and other subordinated debt, including insurers. So far, demand in this area continues a...