Tucked away in the small print was the right for Lloyds to redeem a number of its CoCos should they be excluded from a regulatory stress test.
This has now happened and bondholders have expressed outrage at the potential for Lloyds to buy the bonds back for below market price. The bank is still deciding what to do.
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It is not just a bank crisis that can cause CoCos to implode, it is a bank boom.
CoCos are top-shelf products, for consenting adults only. An investor’s quest for yield should never take them into territory they not only do not, but actually cannot, understand.
Jim Wood-Smith is head of research at Hawksmoor Investment Management
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