Major banks hybrids downgraded

Interesting reasoning from S & P re. their downgrading of the bank hybrids. Essentially it is “that government support would be unlikely to be extended to major bank hybrids and subordinated debt instruments”.


We certainly recall Mr Rudd announcing the Government Guarantee of bank deposits at the start of the last GFC.


And we further recall which bank deposit products were EXCLUDED from the Government Guarantee. I have listed some below:


  1. Cash Management Trusts (Bye bye Macquarie CMT, hello Macquarie CMA)
  2. Debentures (Bye bye Esanda Debentures, hello Esanda TD (not for long))
  3. Bank Bills (Bye bye Bank Bills)


So we think S & P’s reasoning is fair. The government has history in this regard. They won’t guarantee everything issued by the banks, just the key products.


Worth considering when it comes to portfolio allocation, especially in cash, TD’s and fixed interest.