29 June – 03 July 2015

Share

[private role=’subscriber’]

According to a Morgan Stanley report released in early July the sell – off in listed hybrids which occurred at the end of June could be put down to tax loss selling, switching from listed credit into bank equities and credit spread widening due to Greece debt concerns. They believe all three drivers are temporary in nature and are likely to dissipate shortly. The report states, “Without these negative overhangs, investors are likely to become increasingly attracted to the [circa] 7.0% yields available in listed credit, especially if credit spreads narrow from here.”

Evans and Partners’ analyst Michael Saba did an interesting exercise this year and put together a diagram (see below) of a group of hybrids and how they performed in the week before the end of the financial year and the two trading days immediately thereafter . The results are quite clear: selling pressure before and buying pressure after. All these securities are trading under par but whether it is tax loss selling or something else is open to question.

YieldReport-hybrid-3july[/private]

[private role=’subscriber’]

ASX LISTED HYBRIDS

COMPANYCODEHYBRID TYPEMATURITY OR
STEP-UP DATE
MARGIN
INC FRANK
TRADING
MARGIN
∆ WEEKWEEK
CLOSE
YTM
Est**
S&P CREDIT
RATING
COMP/HYBRID
ANZ Banking GroupANZPAMCPS I16/12/20163.10%2.93%0.25%100.455.08%AA-/BBB
ANZ Banking GroupANZPCMCPS II28/09/20173.10%3.78%0.08%100.416.05%AA-/BBB+
ANZ Banking GroupANZPDMCPS II1/09/20213.40%4.19%0.07%986.46%AA-/BBB+
ANZ Banking GroupANZPECapital Note24/03/20223.25%4.22%0.06%96.46.49%AA-/
Bendigo BankBENHBPerpetual21/10/20541.00%2.67%-0.01%75.254.82%A-/BBB
Bendigo BankBENPDMCPS II13/12/20175.00%4.08%0.05%102.46.35%A-/BBB-
Bendigo BankBENPEMCPS II30/11/20203.20%4.11%-0.06%96.386.38%N/A
Bendigo BankBENPFMCPSIII15/06/20214.00%4.49%0.16%97.986.76%/BBB-
Bank Of QueenslandBOQPDMCPS II15/04/20185.10%3.83%0.29%104.776.10%BBB+/BB+
CBA PERLS 3PCAPAStep Up6/04/20161.05%2.58%-0.12%197.64.73%AA-/BBB
CBA PERLS 6CBAPCMCPS II15/12/20183.80%3.65%0.10%100.725.80%AA-/BBB-
CBA PERLS 7CBAPDMCPS II15/12/20222.80%4.06%-0.18%92.996.21%AA-/BBB-
ChallengerCGFPACapital Note25/05/20203.40%4.80%0.06%94.96.95%-/-
EldersELDPAPerp'l Pref30/06/2051N/A0.00%0.00%730.00%N/A
IAGIAGPCMCPS II1/05/20174.00%2.89%-0.43%102.955.16%A+/A-
IAG RESIANGReset pref16/12/20194.00%3.16%-0.09%103.555.31%A+/BBB+
Macquarie BankMBLHBIncome SecPerpetual1.70%3.83%-0.02%72.065.98%A/BB+
MacquarieMBLPACapital Note24/03/20213.30%3.92%-0.06%98.66.19%A/-
MacquarieMQGPACapital Note7/06/20194.00%3.72%-0.11%1015.99%A-/BBB-
Multiplex SITESMXUPAPerp'l PrefPerpetual3.90%5.32%-0.09%83.997.47%BB+/BB
Nat Aust BankNABHAIncome SecPerpetual1.25%3.07%-0.27%74.455.22%AA-/BBB
Nat Aust BankNABPAMCPS II20/03/20193.20%3.97%0.08%97.656.12%AA-/BBB-
Nat Aust BankNABPBMCPS II17/12/20203.25%4.08%0.00%96.486.23%AA-/BBB-
NufarmNFNGStep UpPerpetual3.90%5.48%0.28%84.017.75%BB /B+
PaperlinxPXUPAPerp'l Pref30/06/2052N/A8.80%0.00%8.311.07%N/A
Ramsay Health CareRHCPAPerp'l PrefPerpetual4.85%4.74%0.12%102.77.01%BBB/BB+
Suncorp-MetwaySBKHBIncome SecPerpetual0.75%2.28%0.01%76.084.43%A+/A-
SuncorpSUNPCMCPS II17/12/20174.65%3.82%0.04%102.155.97%A /BBB+
SuncorpSUNPEMCPS II17/06/20203.40%3.88%-0.26%98.26.03%A /BBB+
Seven Network TELYS 4SVWPAPerp'l Pref2/12/20544.75%6.94%-0.27%79.79.21%BB+/BB-
WestpacWBCPCMCPS II31/03/20183.25%3.66%0.03%100.355.93%AA-/BBB-
WestpacWBCPDMCPS II8/03/20193.20%3.89%0.01%98.086.04%AA-/BBB-
WestpacWBCPEMCPS II22/09/20223.05%3.98%0.00%94.96.13%AA-/BBB+
WestpacWCTPAStep Up30/06/20161.00%3.29%0.14%97.85.44%AA-/BBB

** YTM for floating rate securities is an estimate using current interest rates. This will vary if rates change.
Source: Evans & Partners. Dealing Contact Michael Saba +61 3 9631 9813

[/private]