The period between the day on which an investor pays for a new issue of securities and the day on which trading commences can be a harrowing one. In this intervening period, nothing can be done. A contract has been made, securities allocated and yet the investor cannot dispose of the investment until trading begins. Not that investors typically choose to do so, but not having the option can be worrying when markets are volatile.
After weeks of waiting, Challenger Notes (ASX code: CGFPB) began trading on a deferred delivery basis on the ASX this week, with the opening trade going through at $101.20. The notes finished the day at $100.95, a small premium to their $100 face value. They have a call date on 22 May 2023 and an issue margin of 4.40% above BBSW which provides an initial yield around 6.185%. Normal trading is expected to begin on 13 April 2017.
Since the issue was announced at the end of February, margins on ASX listed notes have fallen. The median trading margin has moved from 3.67% on the day of the announcement to 3.41% on the day trading commenced. The diagram below shows how trading margins of non-major bank hybrids fared over that period. Suncorp CPS 2 (ASX code: SUNPC) and Insurance Australia CPS 2 (ASX code: IAGPC) should be ignored as both securities mature in 2017 and small price changes have resulted in large changes to their respective trading margins.
