Hybrid returns lower than corporate bonds over the longer term

Richard Murphy

Australian Corporate Bond Company

For years now the only securities on ASX remotely close to corporate debt have been dozens of hybrids and some subordinated & other securities. Apart from the odd issue, senior bonds from BHP, TLS, WOW, etc., were the preserve of wholesale markets and specialist OTC dealers. Choice was limited for brokers/advisers constrained to ASX’s menu or preferring ASX’s transparency & ease of access. So hybrid v. bond comparisons were somewhat superfluous. Not so today....Returns/volatility comparisons are now relevant for the 6 million investors & SMSFs that call ASX home. Key brand name bonds can be accessed on ASX via the XTB infrastructure - individual bond returns in a plain XTB wrapper. Senior yields sit between TDs & Hybrids, but returns over the longer term paint a different picture. Equity & hybrid volatility & correlation is part of their raison detré. But a 15yr index analysis shows higher bond returns over hybrids, 6.96% to 6.29%, for lower volatility, 2.32% to 5.68%. The case for equity/debt portfolio diversification is known. The question remains, what constitutes fixed income? Read the full report: (VIEW LINK)


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CEO and Co-Founder
Australian Corporate Bond Company

Richard is the CEO and one of the founders of ACBC. He has over 20 years' experience of developing new markets, products and services for ASX Limited. During his time at ASX, Richard was involved in developing the ETF market, the mFund...

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