Commonwealth Bank of Australia’s toying with hybrid investors and brokers’ emotions, downsizing what was expected to be the year’s biggest hybrid raising for a smaller deal due to launch in the coming week or so.

The bank put the word out about its upcoming PERLS-series hybrid deal on Tuesday afternoon, telling retail investors to stick close to their brokers if they wanted to take part.

The early disclosure was made with ASIC’s product design and distribution obligations in mind; the big four now flag hybrid raisings, trying to make sure retail investors had ample time to participate.

The bank said it had a broker syndicate ready and expected the deal to be smaller than the $3 billion PERLS VII - but didn’t put a date, size or price on the upcoming raising.

Street Talk expects the deal to launch with a $750 million-odd headline targeted amount, but leave room to go to $1.75 billion or so, should there be demand. A big part of the raising will be rolling over holders of the existing PERLS VII capital notes, with those notes due to mature in December.

There were $3 billion of PERLS VII raised in 2014 - and obviously not enough to squeeze those into the new deal. The bank’s likely to have to pay a pretty penny for borrowing the money compared to the 280bps margin range that banks could get away with as recently as June, which happened to be the same margin it pays on the expiring PERLS VII.

Fund managers reckoned CBA would have to offer 315bps to 335 bps margin for a seven-year deal under $2 billion total size. Going higher towards the projected $3 billion mark would need another 30bps to 40bps bump up, they said.

A smaller deal size is no surprise - investors know CBA is well funded and debt expensive.

But they know there’s just one bank hybrid maturity due to roll over next year (ANZ’s $970 million in March) and no other deals in the sector, unless a bank tries to take advantage of the empty calendar and launches a new money deal.

CBA hired its own team, ANZ Securities, Bell Potter Securities, Morgans Financial, National Australia Bank, Ord Minnett, Shaw and Partners and UBS and Westpac Institutional Bank as the joint lead managers.

And like recent bank hybrid deals the JLM’s would have to stay away from retail punters, who now need to be either cashed-up wholesale/sophisticated investors or attached to a financial adviser to get a slice of bank hybrids.