AT1 Bonds Hit Record Bull Run on Bank Optimism

The Additional Tier 1 bond market has achieved what many analysts considered unlikely just two years ago: a record-breaking bull run that has defied lingering concerns about the sector’s inherent risks. According to Bloomberg Markets data from October 1, 2025, the relentless rally has produced the biggest bull run ever recorded for this asset class, with the Bloomberg AT1 bond index surging more than 57% from the post-Credit Suisse crisis lows. This remarkable performance demonstrates a fundamental shift in investor sentiment toward bank debt instruments that were once viewed with considerable skepticism.

What makes this rally particularly significant is its scale relative to historical benchmarks. The current surge has officially topped the previous record set during the rebound that followed the coronavirus pandemic in 2020, establishing a new high-water mark for AT1 bond performance. The analysis methodology, which excluded pullbacks of 5% or less to focus on longer-term market trends, confirms that this isn’t merely a temporary spike but represents sustained investor confidence in the banking sector’s stability and future prospects.

The current bull market represents a dramatic turnaround from the dark days of 2023, when the complete wipeout of Credit Suisse’s AT1 notes sent shockwaves through global financial markets. The Swiss bank’s collapse and the subsequent bond write-down created widespread panic among investors, who questioned the fundamental viability of Additional Tier 1 instruments as an asset class. The fact that the market has not only recovered but achieved record-breaking performance speaks volumes about the resilience of these financial instruments and the restored faith in banking sector regulation.

The Switzerland-based Credit Suisse episode now serves as a crucial reference point for measuring the sector’s recovery. The more than 57% surge from those crisis lows demonstrates how thoroughly investor concerns have been addressed through improved bank capitalization, enhanced regulatory oversight, and clearer communication from financial institutions about their contingency plans. The sustained nature of the rally, even excluding minor 5% pullbacks, indicates that this recovery is built on solid fundamentals rather than speculative fervor alone.

Despite the overwhelmingly positive sentiment driving the AT1 bond market, some market observers have expressed concerns about potential overheating. The very factors fueling the rally—renewed confidence in bank stability, attractive yields compared to other fixed-income instruments, and improved regulatory clarity—could also be creating conditions for a potential correction if investor enthusiasm becomes disconnected from underlying economic realities. The relentless nature of the advance, as described in the Bloomberg report, naturally raises questions about sustainability.

However, the current market dynamics suggest that the bull run may have further room to continue. The exclusion of minor 5% pullbacks from the analysis indicates that the underlying trend remains robust, with any temporary setbacks being quickly absorbed by ongoing demand. The fact that this rally has surpassed the post-pandemic recovery of 2020, which was itself driven by unprecedented monetary and fiscal stimulus, suggests that the current optimism is rooted in more durable factors related to bank fundamentals rather than temporary market conditions.

The Bloomberg index’s performance provides concrete evidence that the AT1 bond market has not only recovered from the Credit Suisse crisis but has entered a new phase of maturity and stability. As financial institutions continue to strengthen their balance sheets and regulators refine the framework governing these instruments, the record bull run may represent a permanent revaluation of Additional Tier 1 bonds rather than a temporary market anomaly. The challenge for investors now lies in balancing the attractive returns against the need for prudent risk management in what remains, by design, a relatively high-risk segment of the bank debt market.