Credit Suisse is out with a perpetual subordinated note that garnered massive demand in the market for the high-yield rated Yankee bond, according to investors.
Two investors placed demand around US$20bn at launch while others said the book build was quite large.
Credit Suisse as sole bookrunner declined to disclose the actual figure.
European banks are seeing robust demand for additional tier 1 paper in Europe to kick off the new year and Credit Suisse showed the structure has massive appeal in the US as well.
The Swiss bank moved down in the capital structure with a US$1bn additional tier 1 junior subordinated perpetual non-call 10.
Credit Suisse's issuer ratings are solidly investment grade at BBB+/A- from S&P and Fitch, but at this lower part of the capital structure the notes were assigned high-yield ratings of BB-/BB.
Initial price thoughts started at 5.5% area, but tightened to 5.1% at launch due in part to the expected low supply of AT1 paper in the US this year, which is driving demand, according to an investor close to the trade.
"There is a finite amount of AT1 and lower Tier 2 issuance we're going to see out of the European banks," the portfolio manager said.
"They are just replacing existing securities so there is likely to be a strong technical around that."
At 5.1% the note came massively tighter when compared to Credit Suisse's previous US$2bn perpetual non-call five AT1 note, which priced in July 2019 at 7.5% with similar ratings.
"They are clearly taking advantage of the positive tone and utilizing a longer call to tap new investors because all their other bonds are less than five years and in to call," another investor said.
Still, the notes came wide of comparable notes from JP Morgan and Citigroup that priced Wednesday in the perpetual non-call five fixed-to-float non-cumulative preferred stock structure (which are a type of subordinated security that receives equity credit).
Although they have shorter call periods, JP Morgan priced its US$3bn note inside of Credit Suisse at a yield of 4.6%, while Citi's US$1.5bn bond launched at 4.7%. JP Morgan garnered a US$10.8bn book for that bond.
The portfolio manager said the market is sending a signal that it likes US bank preferred bond more than Yankee subordinated notes, even though both occupy similar parts of the capital structure.