Yes should be a good read, fixed income is an interesting space. No in contingent convertible bonds the bonds are only converted to equity in certain triggering events as I mentioned earlier, you as a bond holder do not have any conversion rights. It absolutely has a place in tier 1 capital but their risk return profile needs to be reevaluated considering the Swiss madness and CS management’s greed.

Additionally, they can be callable and in practice most cocos are called back after 5/10 years during periods of low interest rates.

Correct that’s why I said it’s not “entirely” true! But it will affect the liquidity of banks hence why ECB offered to swap dollars daily as a preemptive measure.

Although this is not entirely true as contingent convertible bonds have specific covenants which allow them to be completely written off at certain trigger activation scenarios. Senior corporate bonds in perpetuity or junior subordinated bonds with fixed maturity usually don’t have such covenants and consequently are still impervious to such precedence.

Legally FINMA would never take such an action if they didn’t have a strong argument for the inevitable lawsuit that is to be followed. ‘Yes Bank’ in India is one such example where they wrote off AT1 bonds in their entirety before shareholders and had a high court ruling against their favour so not all hope is lost. Although, Credit Suisse is quite clear on their bond prospectus so their future ruling could go anywhere. But in principle, I agree that bondholders even if they’re CoCos should be given precedence over shareholders and FINMA’s stance may have something to do with Credit Suisse’s own management incentive.

Disclaimer: I personally have invested into high-yield bond funds and this news is definitely devastating for these specific funds and ipso facto my own portfolio.

You’re very naive if you think it was the Swiss government. The big corporate CEOs wanted a big pay day at the expense of your moms and pops retirement funds for their own ineptitude.