We believe a compelling buying opportunity for hybrid credit exists today.
1. Access to AI-driven growth via electricity demand
Electric utilities are a growing opportunity set, with AI‑driven growth translating into higher regulated capex, increased Hybrid issuance, and improving fundamentals for utility hybrids. Capex growth is expected to accelerate from ~6% to ~9% between 2025 and 2029.
Utility aggregate rate base growth (US$ B)
Source: Barclays. Cross Asset Research: Data Center Capex Rewiring Utility Funding: CDS Implications of More Converts, Hybrids, December 2025.
2. In a tight credit spread environment, hybrids provide additional income over investment-grade and high yield
Relative to investment-grade corporate bonds, hybrid credit continues to command a premium for a similar credit rating: 72 basis points (bps) for BBB-equivalent debt and only -5 bps discount for BB-equivalent.
At 30 September 2026. Source: ICE.
BBB Corporate Bonds: ICE BofA BBB Global Corporate Index. BBB & BB Hybrids: ICE Large Cap Capital Securities Index. BB High Yield Bonds: BB High Yield Bonds: ICE BofA Global High Yield Index.
3. Historically strong fundamentals for banks and insurance
Fundamentals across hybrid issuers—including banks, insurance companies and utilities—remain strong. For example, global systemically important banks continue to demonstrate robust capital levels, profitability and asset quality.
Core capital ratios of major U.S. & European banks
At 30 June 2026. Source: Bloomberg, Cohen & Steers.
Core capital ratios are based on the largest European banks: HSBC Holdings, Deutsche Bank, BNP Paribas, Crédit Agricole Group, Barclays, Groupe BPCE, Société Générale, Banco Santander, NatWest Group, UBS Group, UniCredit, Lloyds Banking Group, Intesa Sanpaolo, Credit Mutuel Group and Banco Bilbao Vizcaya Argentaria. The mention of specific securities is not a recommendation or solicitation for any person to buy, sell or hold any particular security and should not be relied upon as investment advice. Core Capital ratios based on the largest U.S. banks including Bank of America Corporation, JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Company, U.S. Bancorp, PNC Financial Services Group, Truist Financial Group, Regions Financial Corporation, KeyCorp, M&T Bank Corporation, State Street Corporation, Fifth Third Bancorp, Huntington Bancshares Incorporated, and First Horizon National Corporation. Ratios no longer include Comerica or Synovus following the closure of acquisitions this year. The mention of specific securities is not a recommendation or solicitation for any person to buy, sell or hold any particular security and should not be relied upon as investment advice.
Past performance is no guarantee of future results. The information presented above does not reflect the performance of any fund or other account managed or serviced by Cohen & Steers, and there is no guarantee that investors will experience the type of performance reflected above. There is no guarantee that any historical trend illustrated above will be repeated in the future or any way to know in advance when such a trend might begin. An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. There is no guarantee that any market forecast set forth will be realized.