Barcap highlights Yankee bank hybrid opportunities

Barclays Capital has published credit research today in which it examines opportunities in Yankee bank hybrids. Strategists note that these have lagged as senior spreads have benefited recently from the increased transparency provided by the European stress test results.

Barcap believes that many Yankee hybrids are cheap compared with the senior part of the capital structure and highlight securities across different currencies that appear attractive either as high-beta longs on the underlying credit or for picking up yield over short-dated senior debt.

More generally, Barcap says the relative stability of credit over the past month in the face of substantial changes in interest rates and volatility in the equity markets is likely to continue in the medium term. Although spreads are materially lower than during the peak of the credit crisis, from an historical perspective, they are priced for a substantial slowdown in growth. In addition, strategists expect credit to be supported technically as fixed-income investors look for ways to increase all-in yields.