27 July – 31 July 2015

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Westpac hybrid issue puts yields under the spotlighthybrid-yieldreport-31july
The announcement by Westpac of a new issue of tier 1 hybrids with an indicative margin above BBSW of 4.00% to 4.20% has focussed investors’ minds on the margins of similar hybrids. Readers may recall last week’s publication of a set of charts in the “INSIGHT” section of Yield Report which showed the margin at the time of issue and the corresponding margin at the then-market price. Just prior to Westpac’s announcement there were very few major banks’ hybrids with trading margins higher than 4.00%. Since the announcement, a quick survey of prices on the hybrids listed on the ASX reveals selling pressure has led to a general rise in yields, with most of the move on the announcement day.

hybrids-yieldreport-31july

The new $750m Westpac hybrid is causing yield rises in some bank subordinated notes but especially in the Basel III sub notes, SUNPD and WBCHB moving back towards recent highs.

hybrids-yieldreports-31july

The chart to the right looks at recent sector turnover. Average daily turnover for the year excluding the quiet January has been $32.5m per day. Volume has been a little more steady in 2015 compared to 2014, however some lower volumes were experienced in June which was a particularly volatile month with the Greek crisis and the Chinese sharemarket volatility. There was some tax-loss selling in June but in the past few weeks volumes have returned to average levels.

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COMPANYCODEHYBRID
TYPE
MATURITY
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%3.24%0.42%100.455.38%AA-/BBB
ANZ Banking GroupANZPCMCPS II28/09/20173.10%3.92%0.27%100.66.16%AA-/BBB+
ANZ Banking GroupANZPDMCPS II1/09/20213.40%4.13%0.27%98.76.37%AA-/BBB+
ANZ Banking GroupANZPECapital Note24/03/20223.25%4.21%0.35%96.856.45%AA-/
Bendigo BankBENHBPerpetual21/10/20541.00%2.71%0.09%74.034.85%A-/BBB
Bendigo BankBENPDMCPS II13/12/20175.00%3.72%-0.11%103.685.96%A-/BBB-
Bendigo BankBENPEMCPS II30/11/20203.20%4.14%0.10%96.76.38%N/A
Bendigo BankBENPFMCPSII15/06/20214.00%4.18%0.04%99.96.42%/BBB-
Bank Of QueenslandBOQPDMCPS II15/04/20185.10%3.53%0.24%1065.77%BBB+/BB+
CBA PERLS 3PCAPAStep Up6/04/20161.05%3.13%0.51%197.65.27%AA-/BBB
CBA PERLS 6CBAPCMCPS II15/12/20183.80%3.67%0.17%101.115.81%AA-/BBB-
CBA PERLS 7CBAPDMCPS II15/12/20222.80%4.08%0.22%93.256.22%AA-/BBB-
ChallengerCGFPACapital Note25/05/20203.40%4.18%0.20%97.86.32%-/-
EldersELDPAPerp'l Pref30/06/2051N/A0.00%0.00%750.00%N/A
IAGIAGPCMCPS II1/05/20174.00%3.70%0.87%1025.94%A+/A-
IAG RESIANGReset pref16/12/20194.00%3.28%0.15%103.55.42%A+/BBB+
Macquarie BankMBLHBIncome SecPerpetual1.70%3.50%-0.09%74.95.64%A/BB+
MacquarieMBLPACapital Note24/03/20213.30%4.10%0.02%98.26.34%A/-
MacquarieMQGPACapital Note7/06/20194.00%3.86%0.24%100.986.10%A-/BBB-
Multiplex SITESMXUPAPerp'l PrefPerpetual3.90%5.32%0.02%84.017.46%BB+/BB
Nat Aust BankNABHAIncome SecPerpetual1.25%3.01%0.05%73.465.15%AA-/BBB
Nat Aust BankNABPAMCPS II20/03/20193.20%3.91%0.27%98.256.05%AA-/BBB-
Nat Aust BankNABPBMCPS II17/12/20203.25%4.03%0.28%97.16.17%AA-/BBB-
NufarmNFNGStep UpPerpetual3.90%5.41%0.11%84.627.65%BB /B+
PaperlinxPXUPAPerp'l Pref30/06/2052N/A8.80%0.00%7.511.04%N/A
Ramsay Health CareRHCPAPerp'l PrefPerpetual4.85%4.70%0.05%103.726.94%BBB/BB+
Suncorp-MetwaySBKHBIncome SecPerpetual0.75%2.21%-0.02%76.364.35%A+/A-
SuncorpSUNPCMCPS II17/12/20174.65%3.09%0.11%104.255.23%A /BBB+
SuncorpSUNPEMCPS II17/06/20203.40%3.89%0.05%98.66.03%A /BBB+
Seven Network TELYS 4SVWPAPerp'l Pref2/12/20544.75%7.37%0.21%76.59.61%BB+/BB-
WestpacWBCPCMCPS II31/03/20183.25%3.73%0.15%100.645.97%AA-/BBB-
WestpacWBCPDMCPS II8/03/20193.20%3.94%0.32%98.356.08%AA-/BBB-
WestpacWBCPEMCPS II22/09/20223.05%4.09%0.17%94.696.23%AA-/BBB+
WestpacWCTPAStep Up30/06/20161.00%2.72%-0.36%98.74.86%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

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