Summary:
The hybrid securities market remained active this week, buoyed by global credit momentum and investor appetite for yield. Offshore, U.S. corporate bond issuance surged past $56 billion, marking the busiest week since March. Issuers moved swiftly to lock in funding ahead of anticipated rate cuts, compressing credit spreads and drawing demand even for lower-rated names. This global backdrop provided a supportive tone for domestic hybrids.
Trading margins have tightened across major bank hybrids, reflecting strong investor demand and confidence in credit quality. Instruments like CBA’s PERLS and Westpac’s Capital Notes maintain yields between 6.3% and 7.2%, while non-bank hybrids from Judo Capital and Latitude offer higher running yields above 9%, attracting yield-seeking investors.
Issuance activity has remained steady, with banks managing rollover risk by calling and refinancing maturing hybrids. Nearly $5 billion in bank hybrids are set to expire this year, with similar volumes expected in 2026. Retail investors—who hold 20–30% of ASX-listed hybrids—face a narrowing window to reinvest in these instruments. As the market transitions, capital is expected to flow into alternative income products. Overall, the hybrid market continues to offer attractive yields, but investors must prepare for a gradual decline in supply and evolving risk-return dynamics.
Overall, the week highlighted a continued search for yield amid shifting rate expectations, with investors balancing credit quality, call risk, and structural nuances. As global central banks signal policy pivots, hybrid pricing dynamics may evolve further—making issuer fundamentals and margin discipline key watchpoints heading into Q4.
Figure 1: Hybrids: Median Sector Margin
ASX-Listed Hybrids
COMPANY CODE HYBRID TYPE MATURITY/
CALL
DATEMARGIN
INCL. CREDITSTRADING
MARGINDAY
CHANGEDAY
CLOSERUNNING
YIELD**Challenger CGFPC Capital Notes 3 25/05/2026 4.60% 10.03% 0.45% 102.42 8.47% Nat Aust Bank NABPF Capital Notes 3 17/06/2026 4.00% 8.48% 0.36% 101.74 7.83% Suncorp SUNPH Capital Notes 3 17/06/2026 3.00% 7.73% 0.34% 101.01 6.81% Macquarie Group MQGPD Capital Notes 4 10/09/2026 4.15% 5.64% 0.19% 102.95 7.85% CBA CBAPJ PERLS 13 20/10/2026 2.75% 5.32% 0.18% 101.5 6.51% Latitude LFSPA Capital Notes 27/10/2026 4.75% 13.56% 0.36% 98.501 9.06% Westpac WBCPJ Capital Notes 7 22/03/2027 3.40% 6.04% 0.15% 102.98 7.24% CBA CBAPI PERLS 12 20/04/2027 3.00% 4.13% 0.11% 102.59 6.70% Bank of Queensland BOQPF Capital Notes 2 14/05/2027 3.80% 5.27% 0.14% 103.66 7.55% Bendigo Bank BENPH Capital Notes 15/06/2027 3.80% 4.72% 0.11% 103.31 7.49% Macquarie Group MQGPE Capital Notes 5 20/09/2027 2.90% 3.54% 0.07% 102.5 6.57% Nat Aust Bank NABPH Capital Notes 5 17/12/2027 3.50% 3.90% 0.08% 103.76 7.14% ANZ Bank AN3PI Capital Notes 6 20/03/2028 3.00% 2.90% 0.05% 103.459 6.58% CBA CBAPL PERLS 15 15/06/2028 2.85% 3.46% 0.06% 102.77 6.53% Suncorp SUNPI Capital Notes 4 17/06/2028 2.90% 3.77% 0.07% 102.21 6.62% Westpac WBCPL Capital Notes 9 22/09/2028 3.40% 4.24% 0.07% 104.5 7.13% Macquarie Bank MBLPD Capital Notes 3 7/12/2028 2.90% 3.16% 0.05% 103.11 6.53% Bank of Queensland BOQPG Capital Notes 3 15/12/2028 3.40% 3.33% 0.06% 104.76 6.97% Judo Capital JDOPA Capital Notes 16/02/2029 6.50% 4.94% 0.07% 111.8 9.66% ANZ Bank AN3PJ Capital Notes 7 20/03/2029 2.70% 2.82% 0.04% 102.85 6.31% Challenger CGFPD Capital Notes 4 25/05/2029 3.60% 3.30% 0.05% 106.1 7.12% CBA CBAPK PERLS 14 15/06/2029 2.75% 2.88% 0.05% 103.78 6.36% Insurance Australia IAGPE Capital Notes 2 15/06/2029 3.50% 3.82% 0.05% 104.75 7.15% Macquarie Group MQGPF Capital Notes 6 12/09/2029 3.70% 2.92% 0.04% 106.72 7.11% Nat Aust Bank NABPI Capital Notes 6 17/09/2029 3.15% 2.95% 0.04% 105.06 6.69% Westpac WBCPK Capital Notes 8 21/09/2029 2.90% 3.58% 0.05% 104.12 6.63% ANZ Bank AN3PK Capital Notes 8 20/03/2030 2.75% 2.54% 0.03% 104 6.29% CBA CBAPM PERLS 16 17/06/2030 3.00% 2.65% 0.04% 105.65 6.50% Suncorp SUNPJ Capital Notes 5 17/06/2030 2.80% 2.95% 0.04% 103.7 6.42% Nat Aust Bank NABPJ Capital Notes 7 17/09/2030 2.80% 2.75% 0.04% 104.48 6.37% Bendigo Bank BENPI Capital Notes 2 13/12/2030 3.20% 2.88% 0.04% 105.85 6.70% Insurance Australia IAGPF Capital Notes 3 15/12/2030 3.20% 3.41% 0.03% 104.55 6.83% ANZ Bank AN3PL Capital Notes 9 20/03/2031 2.90% 2.55% 0.02% 104.82 6.39% Westpac WBCPM Capital Notes 10 22/09/2031 3.10% 3.19% 0.04% 106.1 6.70% Macquarie Group MQGPG Capital Notes 7 15/12/2031 2.65% 2.91% 0.03% 102.62 6.30% Nat Aust Bank NABPK Capital Notes 8 17/03/2032 2.60% 2.52% 0.03% 104.56 6.16% ASX-Listed Hybrids (Non-standard)
COMPANY CODE BOND TYPE CALL DATE ISSUE MARGIN (inc frank) TRADING MARGIN DAY CLOSING PRICE RUNNING YIELD Nufarm NFNG Step Up Perpetual 3.90% 5.42% 0.41% 89.2 9.03% Ramsay Health Care RHCPA Preference Share Perpetual 4.85% 4.87% 0.29% 106.26 8.47%