Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hi, I’d b interested in your comments on the fairly slow withdrawal of bank hybrids eg WBCPL @9/28 thru to NABPK @ 3/32 with coupons ranging from3.4% to 2.6% & all 100% franking: Also non bank less regulated hybrids eg CGFPD @3.6%, SUNPJ @ 2.8%, IAGPF @3.2% 60% franked Also the odd commercial hybrid RHCPA @4.85% fully franked. Thanks, Regards Craig
Hi Craig,
There are a lot of bank Hybrids that still have many years to run before first call dates where they will be redeemed, so there are options for investment in the space. Hybrids from Macquarie Group will also continue past 2032 and so will the insurers. We have a preference for bank hybrids and insurers over corporates such as Ramsay because their capital levels are regulated. The below table looks at relative value across bank hybrids and other financials as of Friday. Bank Hybrids are generally trading on a margin of ~2% over bank bills, equating to a ~6% yield grossed for franking. WBCPL and NABPK both screen okay. We view current margins as reasonably tight, however bank capital levels are very high, making the hybrids safer.
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