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Some $1.28 billion of investment funds could be looking for a high-yielding home in the next few months amid speculation ANZ New Zealand and a local unit of National Australia Bank will call hybrid notes they sold in 2008 when interest rates were high.
ANZ has $835 million of perpetual callable subordinated bonds with a first call date of April 18. They carry a coupon of 9.66 percent, deemed reasonable in 2008 though since then bond yields have fallen by at least 300 basis points.
BNZ Income Securities, a special purpose vehicle of NAB, has about $450 million of perpetual non-cumulative shares which come up at the end of March and have a coupon of 9.89 percent.
"The banks have got a lot of money – there's a reasonably strong chance they will call those investments," says James Smalley, a client adviser at brokerage Hamilton Hindin Greene. "That's going to continue to underpin our market going forward in a low interest rate environment."
ANZ spokesman Peter Barnao says no decisions have been made yet on the perpetual bonds and any announcement would need to go to the NZX first. BNZ spokeswoman Emily Davies also confirms no decision has been made.
ANZ last year called and repaid $350 million of subordinated bonds issued in 2007 with a coupon of 8.23 percent. BNZ also called $350 million of subordinated bonds sold in 2007 with a coupon of 8.42 percent.
The banks could also elect to reset the interest rate on their securities or make a new issue.