15 Feb – 19 Feb 2016

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In contrast to the listed floating notes and bonds sector, ASX-listed floating rate hybrid margins fell over the week and the median trading margin at the end of the week was 5.09, down from 5.42%. However, trading margins are still at elevated levels.

The big news of the week was the official announcement by CBA that they will be issuing a new hybrid security to replace the PERLS III that has its first call date in April 2016. Details of the new hybrid, PERL VIII, can be found here but it will pay a yield of BBSW + 5.20% -5.30% including franking Institutions will set the actual margin on Tuesday 23 February and it will be interesting to see if this will be the first hybrid to sell at above the bottom of the range. The indicative range of 5.20% to 5.35% above BBSW put the spotlight on margins already available in the secondary market and was criticised by some as being too lean. The chart below shows where it would sit if it went at the top of the indicated range. There are similar hybrids trading at margins above the new CBA hybrid range.

Also of interest is the effect the announcement has had on the existing hybrid issues. Historically hybrid yields have risen as markets have sold hybrids to raise funds to invest in a new issue but this one has, so far been a little different. The issue in fact highlighted some of the value already in the secondary market and investors have instead been buying the higher yielding securities. Investors sought out NAB and Westpac hybrids in particular. Note CBA’s PERLS 3 (ASX code PCAPA) will be redeemed in April and a small price movement has led to a large fall in its trading margin.

asx-hybrid-19feb

By the end of the week, trading margins on comparable bank hybrids had adjusted to finish the week at levels more in line with the latest CBA hybrid offering.

asx-hybrids-19feb

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ASX LISTED HYBRIDS

COMPANYCODEHYBRID
TYPE
MATURITY
OR STEP-UP
DATE
MARGIN
INC FRANK
TRADING
MARGIN
∆ WEEKWEEK
CLOSE
YTM
Est**
ANZ Banking GroupANZPAMCPS I16/12/20163.10%4.00%0.32%100.246.28%
ANZ Banking GroupANZPCMCPS II28/09/20173.10%4.02%0.23%98.506.42%
ANZ Banking GroupANZPDMCPS II1/09/20213.40%5.30%-0.20%91.407.70%
ANZ Banking GroupANZPECapital Note24/03/20223.25%5.40%-0.31%92.007.80%
ANZ Banking GroupANZPFCapital Note24/03/20233.60%5.53%-0.19%92.107.93%
Bendigo BankBENHBPerpetual21/10/20541.00%2.95%0.18%68.505.23%
Bendigo BankBENPDMCPS II13/12/20175.00%5.02%-0.09%101.307.42%
Bendigo BankBENPEMCPS II30/11/20203.20%5.84%-0.28%90.958.24%
Bendigo BankBENPFMCPSII15/06/20214.00%6.14%-0.20%92.108.54%
Bank Of QueenslandBOQPDMCPS II15/04/20185.10%5.09%-0.33%102.607.49%
CBA PERLS 3PCAPAStep Up6/04/20161.05%3.34%-1.04%199.675.62%
CBA PERLS 6CBAPCMCPS II15/12/20183.80%4.65%-0.12%98.936.93%
CBA PERLS 7CBAPDMCPS II15/12/20222.80%5.20%-0.43%88.247.48%
ChallengerCGFPACapital Note25/05/20203.40%6.12%-0.46%90.258.40%
IAGIAGPCMCPS II1/05/20174.00%4.15%-0.06%101.706.55%
IAG RESIANGReset pref16/12/20194.00%4.83%-0.14%98.357.11%
Macquarie BankMBLHBIncome SecPerpetual1.70%4.25%-0.14%65.506.53%
MacquarieMBLPACapital Note24/03/20213.30%5.55%-0.09%93.007.95%
MacquarieMQGPACapital Note7/06/20194.00%4.61%-0.44%99.157.01%
Multiplex SITESMXUPAPerp'l PrefPerpetual3.90%6.65%-0.33%71.508.93%
Nat Aust BankNABHAIncome SecPerpetual1.25%3.62%-0.08%64.945.90%
Nat Aust BankNABPAMCPS II20/03/20193.20%4.90%-0.81%96.207.18%
Nat Aust BankNABPBMCPS II17/12/20203.25%5.26%-0.60%92.907.54%
Nat Aust BankNABPCCapital Note23/03/20203.50%5.34%-0.32%94.507.62%
NufarmNFNGStep UpPerpetual3.90%5.79%-0.14%80.408.19%
PaperlinxPXUPAPerp'l Pref30/06/2052N/A8.80%0.00%10.1111.20%
Ramsay Health CareRHCPAPerp'l PrefPerpetual4.85%4.92%0.02%101.507.32%
Suncorp-MetwaySBKHBIncome SecPerpetual0.75%2.17%0.18%74.514.45%
SuncorpSUNPCMCPS II17/12/20174.65%4.77%0.37%101.007.05%
SuncorpSUNPEMCPS II17/06/20203.40%5.31%-0.95%94.007.59%
Seven Network TELYS 4SVWPAPerp'l Pref2/12/20544.75%10.81%-1.56%56.5013.21%
WestpacWBCPCMCPS II31/03/20183.25%4.63%-0.26%99.507.03%
WestpacWBCPDMCPS II8/03/20193.20%4.81%-0.61%96.707.09%
WestpacWBCPEMCPS II22/09/20223.05%5.40%-0.04%88.807.68%
WestpacWBCPFCapital Note22/03/20214.00%5.21%-0.20%95.947.49%
WestpacWCTPAStep Up30/06/20161.00%3.31%-0.53%99.605.59%

** 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

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