Suncorp CPS3: If you're Suncorp, why not?
Suncorp is back with a new hybrid: Suncorp CPS3. The company has no particular need for funding, but when you can issue junk bonds at an interest rate of 6%, why not?
CPS3 is based on Suncorp CPS2 (see Suncorp CPS2: Hybrids change gear). The main difference is the margin paid (above the floating bank bill rate), which is down from 4.65% to 3.4% (although CPS2 – trading around $106 – offers a current margin to maturity of just over 3% (reflecting CPS2’s shorter remaining ‘term’).
What’s caused the margin to plummet? CPS3 is not a vastly superior proposition than CPS2. What's different is the current demand for anything paying a yield higher than term deposits. That’s what Suncorp is capitalising on here.
To read the full article at Super Advisor follow this link.