There was speculation in the Australian Financial Review last week that NAB may be about to embark on a buyback of its Income Securities issued in 1999. The securities were issued as a perpetual instrument paying a non-deferrable coupon of 1.25 per cent over the 90 day bank bill rate.Apart from the obvious advantage of being perpetual, the income securities counted as tier one capital for NAB up until the start of 2013. Under the new Basel III capital adequacy rules, the income securities qualify only as "transitional additional tier one" capital.This means that last year only 90 per cent of the face value of the income securities was counted towards NAB's additional tier one capital and this year only 80 per cent is counted. This ten per cent reduction in the proportion of face value that can be counted as additional tier one capital will continue on a straight line basis until the benefit is exhausted.However, the income securities have not been a stellar investment for the buyers. It didn't take long for the meaning of perpetual to sink in, and the price of the securities started drifting down.The price of the income securities, which have a face value of $100, approached $60 during the financial crisis and has alternated between there and $70 for most of the time since then.However, at the beginning of last week the price was around $80, an increase of 14 per cent since the start of the year.The AFR argued that investors may be starting to price in the possibility of a buyback. Bendigo and Adelaide Bank and Suncorp have bought back some of their income securities over the last few years.Macquarie Bank and NAB have not, so far.However, it could be simply the relentless search for yield that has seen the running yield on the incomes securities bid down to 4.74 per cent per annum at the start of last week, from 5.17 per cent at the start of the year. Nevertheless, the price of the income securities has jumped-up another $2 since the article was published.Will NAB launch a buyback for the income securities?While the income securities still have value as transitional Additional Tier 1 capital, there would seem little point in doing so. With 80 per cent of the face value of income securities counting as transitional, additional tier one capital the effective cost of the capital is less than 1.6 per cent over the 90-day bank bill rate.This is still very, very cheap. The proportional allocation of face value would have to fall to 40 per cent to 50 per cent before the cost of capital would approach the 300 bps over that the bank would have to pay now to raise new additional tier one capital.A buyback of the income securities would seem to be some way off.