Santander Reminds Investors That Bonds Can Come With Nasty Surprises

The video discusses the risks associated with bonds, focusing on Santander's decision to skip a call option on $1.7 billion of notes, which caused bond prices to tumble. It explains the $340 billion market of contingent capital bonds, which emerged after the financial crisis to provide banks with bail-in capital. Santander's decision not to call the bonds has raised concerns about the perceived risk in the Coco bond market and set a precedent for other banks. Investors now face the possibility of not getting their money back at the first call date, leading to increased costs for banks to raise tier one debt.

What implications does Santander's bond decision have for other banks?

In what ways might banks need to adjust their financial expectations following this event?