Summary: Last year the four major banks issued $5.9 billion of hybrid notes, and the market is now signalling that it is possible to have too much of a good thing. Demand for ANZ’s recent hybrid note issue that pays 3.6% is surprising, given CBA PERLS VII notes were offering a slightly higher margin at the time. It appears NAB does not believe there is now enough demand for the hybrid issue it flagged in mid-December.
Key take out: There are other ASX-listed notes available – some are subordinated while others are senior ranking. When assessing these, consider the size of the credit margin and whether the coupon is deferrable.