Re-sets vs Fixed Rate...

[Penfold]

I did see that GTM did note that they should be bought after next reset... at that point it will be easier to reval. Then you would have to assume it would be called (Its hard to believe ANZ really would let it move to resetting quarterly). Its still expensive Jr Sub-debt. ANZ just called some of their sub-debt on Friday. And they replaced it with senior stuff. Maybe it will be called in 13?

It can be a mission to get info. Just ring around dealers and issuers, if they aren't up on the companies website. I wouldn't invest in anything non-vanilla, if I hadn't read the IM. There can be so many hooks in these things... that amount of stuff with free (or near to it) optionality that was issued pre-GFC is scarey.... Buyer beware.

Revisited the PINS B yesterday after your comment you had bought some. They are looking nicely priced. I will look at picking some up in the coming months. This company is a classic hard to get info from. I ended up having to ring the company secretary in Sydney.

[GTM 3442]

Why would ANZ call the ANBHA's in 2013 when they can do what Infratil are doing with the IFTHA's and buy them back at $0.54 in the dollar, while paying 4.22% as opposed to the 9%-odd at the time of issue ?

Suspect that ANBHA may trade at a higher price than IFTHA, due to the greater perceived security of ANZ re Infratil.

[Penfold]

They would likely not do what Infratil did, or nobody would touch future issues. FR Sub-debt is possibly more important to a bank than an investment company. Also you would have to read the IM; they may not be able to buy them back outside of a call date (at face).

They will trade differently because of the underlying entity as you say, but also the reset margins, call dates, buy backs, ratings, subordination... These things that aren't vanilla can be had to price (and can offer value as a result). I would still buy the IFTHA over the ANZ issue. And like I said to Liz, short dated TD's might be the best option.

[GTM 3442]

Penfold, I think that perpetuals have garnered a sufficiently bad press over the past few years that there is little likelihood of future issues of this type of instrument.

We have moved from a "high" interest rate environment to a "low" interest rate environment. As the change has happened, there are a lot of people who have made capital losses because of the declining price, coupled with an income which has declined with the re-sets.

I can't see how anyone in their right mind would buy these things at face value and set themselves up for a classic double-whammy.

[Penfold]

GTM I remember people saying 20 years ago that nobody would invest in finance companies again.

These perpertuals have a place in company financing. Someone will find a way to make them work again. And investors will line up again.

[GTM 3442]

Penfold - sad but true.

[D B Cooper]

Lizard- Chris Lee's website has a page where he has attached the original prospectus in a pdf file for each bond. I find it very useful.

http://www.chrislee.co.nz/index.php?...nt-investments

[GTM 3442]

Thank you very much indeed Mister Cooper !

[Fred114]

Isn't the reason that the refix's are discounted is that the banks are signed up to new bank capital adequacy rules which require them to progressively reduce the capital contribution made by what are called ‘ hybrid securities’ of which RCSHA is one. This means that would take a haircut on yield at the swap rate.

[Lizard]

What do the experts think? Is it time to swap the Fixed rate securities (e.g. FCG010) for the now discounted re-sets?

Re-sets been moving up strongly since this thread was started, so I guess I can now conclude the correct answer was "yes".

...Or at least the correct short term answer.

ASBPB up from 59cps to 70cps... RBOHA from 75cps to 82cps... IFTHA the laggard, from about 53cps to 56cps.