A week is a long time in markets and equity and credit investors outside of Europe have now all but forgotten the impact of Brexit but government bond yields remain very low.   Westpac Capital Notes 4 commenced trading last Friday and traded strongly with $13.4 million trading hands. It closed at $101.54 or a margin of 4.78% (0.12% tighter than the public offering). The volatility in the underlying shares does not seem to have had much of an impact on the capital notes of late and this would suggest the market has more confidence in this market than a year ago. National Australia Bank Capital Notes 2 (NABPD) are due to commence trading on this Friday.   On Thursday, the financial year closed on a much more positive note than the Friday before (i.e. Brexit). As a whole the ASX listed interest rate security market (including government bonds) posted a total return of 4.06%, substantially outperforming the S&P/ASX Accumulation 200 Index (1.01%). Treasury bonds were the best performers returning a total of 4.22% on average.   In hybrid land, there has been considerable volatility over the last 12 months but in the past quarter we have seen a marked improvement in confidence as institutional investors saw value in the asset class. Over the year the Tier 1 sector slightly outperformed the Tier 2 sector (2.82% vs 1.86% respectively) with Basel 3 compliant securities surprisingly outperforming Basel 2 securities.   In terms of listed issuance, 2016 financial year deals totalled $4.2 billion. The Peet Bonds and Australian Unity Bonds were the only deals not issued by banks.   Click below for Interactive Charts Chart 1: Bloomberg AUSBond Composite Index (Monthly) Chart 2: Bonds vs Equities 2015/2016 (Monthly)   Table 1. ASX Listed Interest Rate Securities Performance (Financial Year)

Index Return
All ASX Listed Interest Rate Securities  4.06%
Exchange Traded Treasury Bonds  4.22%
Exchange Traded Corporate Securities  2.72%
                    Bonds  1.73%
                    Hybrids  3.17%
Tier 1:  2.82%
                    Tier 1: Non Basel 3 Compliant  1.58%
                    Tier 1: Basel 3 Compliant  3.27%
Tier 2:  1.86%
                    Tier 2: Non Basel 3 Complaint  1.52%
                    Tier 2: Basel 3 Compliant  2.59%
BondAdviser Model Portfolio  4.45%
ASX 200 Accumulation Index  1.01%

Source: CBA, Bloomberg, BondAdviser   Table 2. ASX Listed Interest Rate Securities Performance (Financial Year)

Best Performers Return
IAG Convertible Preference Shares  4.06%
Westpac Convertible Preference Shares  4.22%
Suncorp Convertible Preference Shares  2.72%
Worst Performers
Crown Subordinated Notes  -12.1%
Seven Group TELYS4  -7.18%
National Income Securities  -5.45%

Source: BondAdviser