Basel III rules are being finalized around the world, and investors will have to come to terms with a new, complicated $1 trillion debt market as banks start to issue new hybrid debt. “A new era of bank hybrid capital is dawning,” writes Citi analyst Hans Lorenzen. “Banks will still have a strong regulatory incentive to issue hybrid debt – indeed, for US banks it is arguably stronger than previously.” Lorenzen estimates that the total market for new hybrid debt to be $1 – $1.4 trillion, with a 40-60 split between AT1 and Tier 2 debt. Basel III capital requirements…