In recent days share markets have copped a hammering as investors around the globe moved funds to the safety of government bonds. Hybrid securities have not been immune from the large sell-off seen on the ASX, but they have served one of their portfolio stabilising functions in that most of their price falls were not of the same magnitude as for ordinary shares.
Almost all listed hybrids in this area saw yields increase, with the trading margins of hybrids increasing on average by around 15bps. ASX-listed notes and bonds fared better; trading margins in this sector rose half as much on average, although the results were skewed by Australian Unity’s Series 1 notes (which are fast approaching their maturity date when investor receive the $100 face value back). Other exceptions were limited to some of the hybrids known as income securities, as well as Westpac’s Notes 2 (ASX code WBCHB) and ANZ’s Capital Notes 1 (ASX code ANZPD), whose margins actually fell on the day.
The largest change in trading margin, which is a popular way of comparing of yields, was from Crown Resort’s Series 2 notes, which have had a lot of press coverage in recent weeks. The price of these notes fell from $74.25 to $70.00, almost as low as the $69.50 reached at the end of January. According to Evans & Partners the trading margin is now 12.48%. However, this assumes a 2021 redemption date and some of doubts which hang over these notes is to do with likelihood of investors having the redemption date deferred beyond this date.
