The wait for the third Additional Tier 1 capital issue in the domestic market this year has not been a long one. With Westpac's bookbuild for its Capital Notes 4 issue out of the way last week, NAB announced its Capital Notes 2 issue yesterday.NAB has a major advantage over ANZ, which has shown a preference to raise AT1 capital from international investors, in that NAB has ample franking credits to attach to dividend payments and thus will enjoy a lower cost of funds. But on that score, NAB may be hoping to achieve a lower cost of funding than secondary market levels suggest is justified.NAB hopes to raise at least A$750 million from the sale of the Capital Notes 2, which will have a mandatory conversion date in July 2024 and a call date in July 2022. The margin range to be paid over the 90 day bank bill rate is 495 basis points to 510 bps. No doubt NAB is hoping that the margin will be set at 495 bps in the bookbuild scheduled for next Tuesday. However, the ANZPE hybrid notes with a call date in March 2022, offer a trading margin of 508 bps, and the WBCPE hybrids with a call date in September 2022 offer a trading margin of 503 bps. In addition the yields to maturity available on these securities are 7.23 per cent and 7.21 per cent per annum, respectively. If the margin on the Capital Notes 2 is set at 495 bps, then the trading margin will be 495 bps and yield to maturity will be only 6.95 per cent per annum.Even the much maligned CBAPD hybrids are offering a trading margin of 497 bps and a yield to maturity of 7.17 per cent per annum. The notes can be called in December 2022.Westpac enjoyed a very good reception for its Capital Notes 4, largely because the trading margin offered exceeded those available from comparable securities in the secondary market at the time. NAB may find that it has attempted to fine tune pricing a little too much. It may also find that the issue size struggles to exceed the A$750 million figure suggested. This is a new issue of AT1 capital and it is not being undertaken to cover the call of an existing issue. Thus, there will be no existing investors seeking to rollover.While the raising will boost NAB's regulatory capital, the proceeds will be used for general corporate purposes. Apart from pricing considerations, the Capital Notes 2 come with all the standard features or detractions of AT1 capital notes.The offer will open on June 8 and will close on June 30. Deferred settlement trading on the ASX, under the ticker NABPD, will commence on July 8.