Thoughts on Hybrids & future trading ranges

Hi Scott,

1. Hybrids have been a solid investment and we continue to like the asset class more broadly, however right now prices have risen (quiet a lot last month) pushing margins lower, a result flows into the secondary market due to large scale backs on primary issues (new listings).  On a typical tier 1 bank hybrid with ~6 years to run (ANZPJ, WBCPL, CBAPK, WBCPK & NABPI examples here), margins are now~2.55% which is low. A year ago, these margins were above 3%. Typically, we view margins below 3% as expensive, and above 3.5-4% as cheap for major bank tier 1 issues. While there are a bunch of factors playing into this, our broad observation is that hybrids are now on the expensive side.  We are running a webinar on Hybrids this coming Wednesday, keep an eye out for an invitation early next week, I’ll be joined by Cameron Duncan who manages over ~$1bn in this space. He is a really good guy and you’ll no doubt come away with a greater depth of knowledge in the space.
2. At this stage as MM migrates down the risk curve, we are cautious towards the ASX200 when it comes to our forecasted trading range, previously we said 6400 -7200 which proved to be too pessimistic, going out on limb again we will call 7450 – 6550 for the next 6-months.

chart

ASX 200 Monthly Chart

LAST UPDATED 09/12/2022 16:39

Close

chart

ASX 200 Monthly Chart

LAST UPDATED 09/12/2022 16:39