This Week in China: Banks Drive World’s Busiest AT1 Bond Market

In the past 18 months, no group has issued more of the controversial additional Tier 1 bonds than Chinese banks.

State-owned lenders sold about $42 billion worth of AT1 notes, the riskiest type of bank debt, to onshore investors, Bloomberg Intelligence analysts Pri de Silva and Adrian Sim said in a recent note.Crucially, the funding has been used to reduce exposure to dollar debt and refinance at cheaper rates, redeeming almost $9 billion offshore AT1s at the same time.

As investors fret over the future of this kind of debt after the complete wipeout of Credit Suisse Group AG’s ...