Crédit Mutuel AM: Monthly commentary subordinated debt

February 16, 2026

Fixed Income

Subordinated debt got a flying start to the year, with market momentum mirroring the pattern seen in 2025

Are we seeing a repeat of the same ingredients? Namely, strong demand for the credit market, particularly for high beta assets such as subordinated debt, a primary market offering opportunities at relatively decent cost and with high levels of over-subscription, spreads tightening in a compression dynamic comparable to the previous two years, and calm optimism despite the surrounding geopolitical turmoil and high relative valuations.

The iBoxx € indices performed very well over the month, with CoCos up 1.4%, insurance Tier 2 up 1.0% and corporate hybrids up 0.8%, outperforming the high yield liquid segment (+0.5%). CoCo spreads reflect this renewed appetite for risk, standing at 245bp (OAS vs. govt bond) at the end of the month, a tightening of 19bps.

The primary market offers reassuring signs that investors are not prepared to tolerate excessive exuberance. The general observation is that investors have a greater appetite for duration, given the increasing steepening of yield curves in recent months.

Specifically, some perpetual debt transactions were priced at levels considered tight (e.g., UniCredit with an AT1 with a coupon of 5.8%, which significantly reduced the size of the final order book and led to the security underperforming on the secondary market following its issue), while others were able to leave a small premium over the secondary market, thus ensuring a smooth ride in the sessions that followed (e.g., Unipol Assicurazioni in RT1 6% and Raiffeisen Bank International in AT1 €6.2%).

January ended with the start of the financial results season in Europe, with a relatively calm outlook for the European banking sector in terms of credit metrics, with balance sheets continuing to improve for Spanish banks, for example.