Weekly trading idea: Buy NABHA

Weekly trading idea: Buy NABHA. It is becoming increasingly difficult to find value in the ASX listed debt and hybrid market with the rally seen over 2014. One security that we view as value is NABHA which is on a 4.72% running yield at $82.14 plus the potential for capital upside if the rally in the hybrid market continues. We expect near term security price strength in the NABHA security price following the AFR article on 22 July which speculated NAB could follow BEN & SUN who have both conducted off-market buy-backs of their perpetual income securities (BENHB & SBKHB) at $80. The AFR article outlined a buy-back at $85 could deliver NAB a $300m profit on this $2bn issue. We view NABHA redemption as unlikely until major bank new issue margins on prefs are well below 2.00%.