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Where to learn about Hybrids?

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Where to learn about Hybrids?

Hi - Hybrids, specifically high quality/lower end of risk type such as I'd expect from major Banks....finding it hard to get educational articles on how to compare and select them. Any chance you might have anything or pointers on where to get help. I created an account with Bond Advisor but they seem to assume you know what you're doing...Cheers Dave B.


Hi Dave,

  • When thinking about a hybrid security we need to understand the drivers of returns.
    The issuer, how secure are they? Most investors stay in the bigger bank hybrids which are much the same, and that security issue is less relevant.
  • Type of security. There are generally two types, a tier 1 security or a tier 2 security. Tier 2 is safer; more debt like with less convertibility, so they pay lower rates while Tier 1’s are what the banks have generally been issuing given higher capital requirements. To keep things simple, tier 1 securities are the most common, so comparing these is probably most relevant &
  • Duration, the longer the time to first call date, the higher the yield should be, more time for things to go wrong.  Shorter dated, all things being equal mean safer, less volatility.

This link will take you to a piece written in 2020 on Understanding Hybrids that I have borrowed from our Income Desk at Shaw: Click here

I think your question Dave is a very relevant one and one that could do with some further discussion. I will plan a webinar on Hybrids. If you and other subscribers have specific questions on Hybrids, please send them in to me using the subject line Hybrid Questions: [email protected]

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