Today I argue that while Labor have given ScoMo a shot of winning the election with its shocking recent mis-steps and its bizarre tax-everything-that-moves-platform, the media coverage and political analysis has never been more biased in all likelihood because those inside the beltway fervently believe that ScoMo does not have... Show More
A few quick thoughts on recent credit spread movements in the Tier 2 subordinated bond and the Additional Tier 1 capital hybrid markets. First, the screenshot below shows the clean price of the most recently issued, 5 year major bank subordinated Tier 2 bond. The impact of APRA’s November 2018 consultation... Show More
A column in The Australian over the weekend argued that mums and dads should think about selling their fully franked bank Tier 1 hybrids to buy unfranked Tier 2 subordinated bonds. But this analysis is flawed on many bases, the most obvious of which is that the unfranked cash yields... Show More
In the AFR today I examine why the ASX hybrid market is once again booming and changes S&P announced this week to the way they are rating Aussie banks that could result in rating shifts for subordinated bonds and hybrids (click on that link to read for free or AFR... Show More
In my AFR column I analyse one of the most debated investments on the ASX: the $2 billion NAB raised in 1999 via its National Income Securities (ASX: NABHA) (click on that link to read via Twitter or direct AFR subscribers can click here): Show More
During the Italian crisis there were some big moves in credit spreads overseas, and I've been asked a few times how current ASX hybrid spreads/returns compare to the major banks' hybrids issued in US dollars. Enclosed is a quick summary. Show More
Two quick charts looking at the risk and return trade-off between ASX equities and ASX major bank hybrids. The first chart considers the current cash (unfranked) and fully franked dividend yield on the ASX200 index versus a range of major bank hybrid yields in both franked and unfranked terms. The... Show More
Labor's Batman by-election win in Victoria makes its proposed changes to franking rules more promising. It's a good time to reassess your investment decisions and potential loss of income, especially if you are invested in hybrids. These securities are expected to be less attractive and prices to be more volatile Show More
In my AFR column I speculate that sanity could prevail and the mooted CBA hybrid that is expected to be launched next week could actually be attractive, offering a much higher margin and shorter maturity than Wesptac's latest issue (ASX: WBCPH) (click on that link to read for free or... Show More
2017 year has been a positive year in the ASX Debt and Hybrid market, where an absence of shock events has restored investor confidence. A 0.34% fall in major bank wholesale funding costs has also been supportive of the hybrid market, combined with historically low levels of market volatility. With... Show More
If you already own Hybrids you’ll be familiar with some of their benefits: attractive yields, access to franking credits and lower volatility relative to equities. However, as terms and conditions differ from security to security, Hybrids can be a complex and admin intensive asset class for investors. Show More
In the AFR today I argue that the Royal Commission will give us even more conservative and risk-averse "narrow" or "utility" banks with fewer non-core businesses (bye bye planners, wealth, insurance, funds management and proprietary traders). As with the Austrac saga, the end game is stronger banks with lower risks... Show More
We are often surprised that retail investors with whom we speak, are blissfully unaware of the risks involved in owning hybrids. ASIC and the banks have done a great job disclosing the risks, however, the message does not seem to be relayed effectively by financial intermediaries. We hope this note... Show More
The Global Financial Crisis of 2008 (GFC) was a turning point for bank hybrid investors. Though most investors still focus on the traditional risks associated with bank hybrids, regulatory changes have not only altered the risks investors in hybrids are exposed to but also increased the total level of risk.... Show More
In the AFR I argue that Westpac's landmark US$1.25 billion hybrid issued into the US market this week, which was initially 11x oversubscribed, will reduce the bank's need to issue future hybrids on the ASX and thereby choke domestic supply. This 10 year hybrid was also priced at a credit... Show More
In the AFR I review the government's latest monthly financial data, which shows that Australia's budget deficit is the smallest since 2013 and currently running much better than expected care of strong commodity prices, corporate profits, and asset price appreciation. I also present new research that prices the downside risk... Show More
Spanish banks have until recently been an attractive way for investors to play regional economic recovery and rate normalisation. The real estate market in Spain is in recovery mode and prices remain significantly below pre-crisis peak levels (unlike many other countries, including Australia). Domestic Spanish banks generally remain highly leveraged... Show More
In The AFR I argue that it's time for the major banks to get "long-term greedy"---as my former Goldman Sachs bosses would implore---when it comes to pricing new deals in the fickle ASX hybrids market. Current market pricing implies hybrids are trading around fair value and smart hybrid issuers will... Show More
In The Australian Financial Review I reveal what is likely one of the best non-tech trades of the 21st century (with a 2,000% gross return) that I had to fly to Las Vegas to learn about; discuss the top trades in my own portfolios in 2016, which focussed on the... Show More
In The AFR I publish new research on the bottom-up valuation models we use to price ASX hybrid securities to determine whether they are cheap or expensive given high-profile hedge fund manager Michael Hintze's claim this week that the sector is attractive. While we employ a range of top-down regression-based... Show More