Is it a coincidence that Macquarie chose Budget eve to announce the details of its new hybrid note issue? There is nothing innovative in the hybrid notes being offered. The big question for Macquarie Group is how much appetite still exists among retail investors for hybrid securities issued by financial institutions to boost their tier-one capital. The last issues of this type came from Westpac and National Australia Bank, in March. Since then, the trading margins on these issues have moved in to 292 basis points and 289 bps, respectively, from 320 bps at issue. This is probably not too bad, but then again the two bank hybrids include approximately two months of accrual on a quarterly coupon. There comes a time, as we saw last year, when there was a rush of corporate hybrid issuance, when investors' risk appetite for a class of security or issuer becomes sated and new issues become harder to fill. Macquarie Group may now find itself in this position with the launch of its minimum A$400 million capital notes offer yesterday. The notes are intended to replace the A$600 million of convertible preference shares issued in 2008. The 2008 CPS were very attractive, paying an 11.095 per cent per annum cash coupon. This time around investors are being offered 400 to 420 bps over the 180-day bank bill rate. Franking may vary from zero to 100 per cent. Macquarie is currently franking its ordinary dividends to 40 per cent. As these securities are considered equity, an equivalent level of franking must be applied.Given the similarity in the credit quality of Macquarie Group, compared with Bendigo and Adelaide Bank and Bank of Queensland, Macquarie has finely pitched its capital note offer between the two similar issues from the aforementioned banks. Bendigo's hybrid notes are currently offering a trading margin of 392 bps in the secondary market, in from 500 bps at issue in November last year. The notes can be called in December 2017.BOQ's hybrid notes are offering a trading margin of 431 bps in the secondary market, in from 510 bps at issue in December last year. The notes can be called in April 2018.The earliest call date on the Macquarie Group capital notes is June 2018.To qualify as additional tier-one capital the notes are perpetual and the coupons are non-cumulative, payable at the sole discretion of Macquarie. And there is a "non-viability trigger" upon the enforcing of which the notes will be converted immediately into ordinary Macquarie shares. If conversion cannot take place within five days, the notes will be simply written off.The only difference between the Macquarie Group capital notes and the other hybrid notes recently issued by other financial institutions is that there is no "common equity trigger" in addition to the non-viability trigger. For banks, the common equity trigger comes into effect should the common equity of the bank fall below 5.125 per cent of risk-weighted assets. This trigger should be activated before the non-viability trigger and provides some chance of