Commonwealth Bank will be hoping that many investors in its maturing hybrid securities PERLS V will elect to rollover their investment into the new hybrid note issue PERLS VII, which was launched yesterday. But the new notes are not as attractive. The new hybrid instrument is has been set at A$2 billion to replace the $2 billion of PERLS V outstanding but the issue size can be adjusted up or down depending on demand.The PERLS VII Capital Notes come with all the structural components that are now standard for Basel III compliant Additional tier one capital instruments.The notes are perpetual, exchangeable and redeemable, with capital event and non-viability conversion triggers in place. The coupons are discretionary, subject to a solvency test and non-cumulative if they are not paid. If they are paid, they should be fully franked.If all goes according to plan, the notes will be called by the bank in December 2022. Otherwise mandatory conversion into ordinary equity will take place in December 2024, if the conversion tests can be met. If not, the notes will remain perpetual.The PERLS V notes do not contain capital event and non-viability equity conversion triggers. The PERLS V were callable after five years, whereas PERLS VII investors will have to wait eight years for their notes to be called.Moreover, the PERLS V notes paid a pre-franking margin of 340 basis points over the 90-day bank bill rate, the PERLS VII notes may only pay 280 bps over. The notes are being marketed with a margin of 280 to 300 bps, but the trend to date has been for these issues to price at the tight end of the indicated range. Continuing margin compression on these instruments in the secondary market is likely to ensure the trend continues. The margin on the hybrid notes issued by ANZ and Westpac earlier this year, have contracted in the secondary market to 244 bps and 252 bps, from 325 bps and 305 bps at issue, respectively.If the margin is not set at the tight end of the indicated range, it will suggest that investors' ardour is starting to wane. More investors are becoming aware of the risk return trade-off between hybrid notes and ordinary equity. Following CBA's profit announcement last week, its shares were selling on a prospective dividend yield of 6.6 per cent, on a pre-tax basis. CBA is promoting a pre-tax yield of just 5.43 per cent in the prospectus. Yet the hybrid notes come with all the downside of equity and none of the upside. The bookbuild for the issue is scheduled for next Monday, with the issue to open upon the margin being announced the next day. The issue will close on September 19 and deferred settlement trading will commence on October 2.For PERLS V holders wishing to rollover, they will have from next Tuesday to September 17 to elect to do so.