Europe bank Additional Tier 1 AT1 bonds up
Europe bank shares up 3.6, set for biggest gain since Oct
Cost of insuring banks against debt default falls
Invesco39;s AT1 Capital Bond ETF up more than 2.5

LONDONSINGAPORE, March 21 Reuters An uneasy calm descended across battered bank bonds and shares on Tuesday, with prices recovering a day after regulators sought to convince investors that the hit facing bond holders of embattled Credit Suisse is isolated.

Additional Tier 1 AT1 bonds issued by European lenders rose with UniCredits 6.625 issue up more than 3 cents.

AT1 bonds from others such as Deutsche Bank, UBS and BNP Paribas rose more than 2 cents, data from MarketAxess and Tradeweb showed.

On Monday bank AT1 bonds had taken a beating after news that those issued by Credit Suisse would be written down to zero as part of a rescue merger with UBS.

Banking supervisors in the UK and the euro zone on Monday had tried to stop a market rout by stressing holder of such junior bank debt would only suffer losses after shareholders had been wiped out.

Yet Tuesday39;s gains in European AT1s only partially offset the hefty losses of 5 cents or more suffered on Monday and sentiment remained fragile.

Looking forward, the bank debt market is likely to remain fragile as well as vulnerable for news headlines, said Joost Beaumont, head of bank research at ABN AMRO.

AT1s are issued by banks to help them make up the capital buffers which regulators require them to hold. They can…