In The AFR I explain why CBA's cerebral treasury team has done a brilliant job executing the latest ~$1.5bn ASX hybrids issue, called Perls 9, which was very heavily oversubscribed on the back of CBA paying 30 basis points in additional annual spread (or income) on top of what was available in the secondary market prior to the deal being reported by the press. Finally a bank is treating retail punters like their insto clients (ie, by not printing deals that are flat to or inside secondary curves)! I argue that Perls 9 looks cheap relative to other bank-issued BBB rated securities and note that the ASX hybrid sector remains about 130 basis points wide in spread terms of the 260 basis point tights touched in 2014 in contrast to the securities above (Tier 2 subordinated bonds) and below (ordinary shares) them in the capital structure, which are both trading at or near their 2014/2015 peaks. Since that time the major banks have accumulated large amounts of common equity capital---and APRA says there is more to come---which further reduces the risk of default on hybrids, bonds and deposits. I go on to argue that Anna Bligh is a brilliant choice as the new chief of the Australian Bankers Association, which needs a leader who can forge a coherent singular narrative across the conflicting interests of its major and regional bank stakeholders. Free (VIEW LINK)
Christopher Joye is Co-Chief Investment Officer of Coolabah Capital Investments, which is a leading active credit manager that runs over $2.2 billion in short-term fixed-income strategies. He is also a Contributing Editor with The AFR.