One of the unlikely outcomes from what we now might call the “franking credits scare” that dominated the election campaign has been the realisation among many investors that they need to look further for income.Many investors have yet to fully explore bonds, especially high-yield bonds. A high-yield bond is one... Show More
ASX listed fixed income ETFs grew strongly in 2018 with $1.3 billion in net inflows, ranking third after International and Australian equity ETFs. The total value of fixed income ETFs is over $5.5 billion across 25 ETFs. Show More
Lately, we’ve been on edge with domestic and global corrections happening. Here are four defensive assets to further guard your portfolio against impact. Show More
Each year S&P Global releases a global report that shows defaults as well as rating movements (upgrades and downgrades). Yet again, the report shows that investment grade bonds and other securities are a statistically low risk way to invest. Show More
The AUD dropped harder and faster than other Asian currencies on Friday reinforcing its position as a liquid and flexible proxy for the Asia region. Right now the Australian economy is performing at its best in years which should be good news for the AUD, but the currency is sending... Show More
The recent by-elections should serve as a warning to investors reliant on franking credits for income. Significant swings to Labor while the Liberals stand by corporate tax cuts, increase the chance of a Labor victory and, with it, Labor’s stated policy of removing franking credit refunds to investors who do... Show More
In the scramble for customers, some fund managers and superannuation providers are taking on additional risk, investing in a range of assets and deeming them ‘cash’ when clearly they are not. Show More
Here I suggest five Indexed annuity bonds that are perfect for retirees looking for low risk, stable additions to their portfolio as well as helping meet minimum withdrawals for SMSFs in drawdown. Show More
Recently Deloitte Access Economics published “The Corporate Bond Report 2018 – Australia’s growing appetite for corporate bonds” which FIIG Securities commissioned to shine a spotlight on how the corporate bond market performed and the potential it offered to Australian investors. Show More
The high yield bond market continues to grow ahead of the FIIG High Yield conference on 17th May, with a new bond from Afterpay and news that Virgin Australia is preparing to issue in AUD Show More
Great explanation Andrew
That's true William, in an ETF you have no maturity date, whereas direct investors have that comfort. Also, in some cases income is high but the yield to maturity is much lower and not attractive, so investors really need to dig a little to get the full picture.
Hi Peter, thanks for your comments. Hybrids are very complex investments and each one is different, meaning investors should read each prospectus to understand the risks involved. Investing direct and through a fund means you may be quite concentrated - probably worth reviewing. High yield bonds are great for diversity, as you can get exposure to lots of different industries. While they can also be complex, specific debt research should help you decide whether they are right for your portfolio. One last point, many investment grade bonds are now yielding over the 4% mentioned from your hybrid fund. These are higher rated and less complex than the hybrids. Let me know if you are interested in learning more about bonds. Regards
Thanks Mr T, I agree its all about the risk and return equation and whether as an investor you think you are being paid enough. It's always interesting to compare what else is available and zipMoney as a competitor is a worthy benchmark.
Hi Stephen, The perceived credit risk of the company issuing the bonds was the most important factor during the GFC. Very low risk company bonds were ‘flight to quality’ and performed well. At this point in the cycle investors preferred Longer dated fixed rate bonds with long duration to lock in high rates - they reasoned interest rates would have to fall. High quality floating rate bonds with short durationwould have also performed well, but poorer credits less so, given a greater perceived chance of default.
Thanks Bob, I'm not surprised its been a real out performer.
I agree the proposed changes are a long way from becoming law and I would expect some concessions if Labor win the next election but there is no guarantee existing terms will be grandfathered
Hi Andy, I agree its low and not very appealing.The main investors in this bond would be institutions, mandated to hold certain investment grade percentages. Typically they can't access the same deposit rates as retail investors and huge sums mean the government guarantee to $250,000 doesn't cover their investment. At this stage of the cycle, when interest rates are low and many assets look over-valued, investors start to focus on capital preservation rather than yield. Telstra is a large corporate, known to overseas investors and should have no trouble refinancing or repaying this bond when the time comes. The other benefit of low risk bonds is that they are generally liquid, allowing investors to access capital on a T+2 basis and invest in something else. There are other investment grade bonds available paying circa 4%, that might make better sense.
Hi Geoffrey, unfortunately we can only offer these bonds to 'Australian residents for taxation purposes'. You'll need to find a bond dealer/ broker in New Zealand in order to set up an account and trade.