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Hybrid Performance Post Brexit

Categories: Hybrids

Major bank tier 1 hybrids have continued to rally over the past fortnight as markets have shrugged off the spike in market volatility experienced directly after the 23rd June Brexit vote.

 

The Westpac Convertible Preference Shares (ASX Code: WBCPC) have had the largest compression in spread (0.84%) followed by the NAB Convertible Preference Shares 2 (NABPB) compressing by 0.63%. Pleasingly, the recent issues have also rallied with the Westpac Capital Notes 4 (WBCPG) & the NAB Capital Notes 2 (NABPD) also contracting by 0.31% & 0.09% respectively.

 

As we have alluded to in the past, the prospect of less primary issuance over the remainder of 2016 in the tier 1 hybrid market is a key driver of market dynamics at the moment.

 

Figure 1. Major Bank Tier 1 Hybrids Curve Has Shifted Lower

Source: BondAdviser

 

Figure 2. How Individual Major Bank Hybrids Have Performed

Source: BondAdviser