During the September quarter, there were 4 new Hybrid issues totalling $4bn. These came from ANZ which we participated in and hold in this portfolio (ANZPI), Macquarie, Suncorp & Westpac. The average margin over and above the bank bill rate for major bank hybrids remained low throughout the quarter, with average margins for > 3-year major bank hybrids contracting by 0.04% from 2.37% to 2.33%. As first “cab off the rank” at a point when margins were a little wider, ANZ issued the ANZ Capital Notes 6 (ANZPI) with a first optional call exchange or call date of 6.75 years, at a margin of 3.00%. The other three issuers priced a 2.90% margin with Macquarie at around 7 years, Westpac at 8 years, and Suncorp at 6.75 years.
The ANZPI which MM purchased during the quarter is trading at $102.49 – the pick of the bunch for sure!
We continue to view Hybrids as a good portfolio diversifier
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