Corporates tend to get overshadowed in a market dominated by banks but careful security selection could have warranted significant returns over the course of the current financial year. The smallest security on issue, Peet’s Convertible Note (PPCG) was the ASX’s best performer over the past 12 months, benefiting from a hot property market and prudent capital management policies, while Seven Group’s TELYS4 experienced a substantial sell-off over fear that management would cut dividend payments. Crown Resorts were also hit hard over potential corporate activity with both subordinated securities reflecting the market’s negative sentiment. However, if we compare the first half of the 2016 financial year with the second half we can see that modest improvements in commodity markets accompanied by strong strategies has helped groups such as Caltex and AGL. While we would expect Origin to somewhat share this momentum, its commitment to its December call date has led to limited upside in ORGHA. This is the same story for Peet as PPCG was refinanced into Peet Bonds (PPCHA), which has seen strong demand. On a relative basis, the market still has negative sentiment towards perpetual securities (SVWPA, NFNG and MXUPA), with the exception of Ramsay Health Care’s RHCPA. Overall, the listed market has been much more optimistic year-to-date and has recovered most that was lost in the second half of 2015. We expect demand for yield to be continually strong as the low interest rate environment (with the potential to go even lower) will persist over the medium term. Additionally, corporate interest-rate securities offer an important source of diversification in a market overrun with banks. Therefore, we expect corporate securities to perform well over the course of 2016 as they have limited exposure to the over-supply bank hybrids are experiencing (as Australian banks shore up capital reserves). This will drive demand for corporate securities and we expect future market returns to reflect this.