Bell Potter’s fixed income team think investor demand for income will lead to a re-rating of hybrids with high issue margins. In a note sent to clients this week, Bells are recommending a switch from ANZ Capital Notes (ASX code: ANZPD), which have an issue margin of 340bps and a trading margin of 391bps, to Westpac Capital Notes 4 (ASX code: WBCPG) with an issue margin of 490bps and a trading margin of 450bps. According to Bells, not only do investors receive more of the total annual return in the form of income, the total return per annum will also be higher.
Here’s a chart showing trading margins at the close of business on 30 August.
