Avoid ANZ Capital Notes 3

When a banker offers you a hybrid security and 124-page prospectus, hold on to your wallet. Since all the hybrid securities we bought during the GFC have become overvalued, we’ve pretty much had a ‘no hybrid’ policy (see No NAB or AMP hybrids for this model portfolio). ANZ’s latest Capital Notes 3 are no exception. The 3.6-3.8% margin the Notes offer above the bank bill rate (currently 2.6%) looks appealing relative to term deposits and is far superior to the 2.8% margin offered by the most recent hybrid issue (see Commbank PERLS VII Capital Notes: Storm clouds brewing?). Nonetheless, it’s...

When a banker offers you a hybrid security and 124-page prospectus, hold on to your wallet. Since all the hybrid securities we bought during the GFC have become overvalued, we’ve pretty much had a ‘no hybrid’ policy (see No NAB or AMP hybrids for this model portfolio). ANZ’s latest Capital Notes 3 are no exception.

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