Selfwealth offers trading in all types of ASX-listed bonds, including:
- Exchange-traded Treasury Bonds (eTBs)
- Exchange-traded Treasury Index Bonds (eTIBs)
- Corporate bonds
You can search for and buy bonds in the Selfwealth platform in the same way as stocks. You can find the ticker codes for eTBs, eTIBs and corporate bonds linked in the sections below.
Exchange-traded Treasury Bonds (eTBs)
What are eTBs?
'Exchange-traded Treasury Bonds' ('eTBs') provide an accessible way for retail investors to gain exposure to Australian Government-issued 'Treasury Bonds'. Treasury bonds are a type of 'debt security, meaning that they pay the owner an agreed-upon rate of interest (the 'Coupon Interest Rate') at regular intervals until the 'Maturity Date', which is when the principal amount is paid back to the holder along with the last Coupon Interest payment.
While Treasury bonds are not traded on an exchange and are largely outside of the reach of retail investors due to their large parcel size, eTBs are traded on the ASX electronically with a reduced parcel size, making them a much more convenient alternative for smaller investors.
When you purchase eTBs, you gain beneficial ownership of Treasury Bonds in the form of 'CHESS Depository Interests' ('CDIs') (for more information on CDIs and how they function, click here). eTBs provide all the economic benefits (including Coupon Interest and principal payments) attached to the legal ownership of the Treasury Bond it was issued over, with one eTB unit giving beneficial ownership of $100 Face Value of that Treasury Bond.
Where can I find a list of eTBs?
There are dozens of eTBs currently listed on the ASX, with unique ticker codes and differing Coupon Rates, Coupon Interest Payment Dates and Maturity Dates. These details, along with others, are covered in the 'term sheet', which is a document issued for each eTB outlining important details.
You can find a full list of ASX-listed eTBs, their ticker codes and the relevant term sheets by clicking here.
How much interest is paid on eTBs, and how is it paid?
The Coupon Rate paid on an eTB will vary between individual bonds. Additionally, although Coupon Interest is paid twice yearly on all eTBs, payment dates will vary between bonds. You can find this information in the term sheet, along with other important details such as the Maturity Date.
Coupon Interest on eTBs is paid via direct credit (bank transfer) twice yearly. For an eTB holder to receive their Coupon Interest payment, they must nominate a bank account with the 'registrar', similar to how you nominate to receive dividends for your shares through a share registry.
Computershare Investor Services act as the registrar for all eTBs. To nominate an account to receive Coupon Interest payments, you can contact Computershare using the below details:
Telephone
+61 3 9415 4026
1800 674 428 (within Australia)
Email
austgovtbonds@computershare.com.au
Mail
Australian Government Bond Registrar
Computershare Investor Services Pty Limited
GPO Box 2975
Melbourne VIC 3001
AUSTRALIA
What are some of the risks associated with investing in eTBs?
The Australian Government has never defaulted on either interest or principal payments for Government Bonds, so they are considered to be a very secure investment. That being said, there are some risks associated with investing in eTBs.
The price of eTBs are determined by the market and will fluctuate over time due to various influences, but it's most strongly linked to changes in interest rates. Typically, if interest rates increase the price of an eTB will likely fall, and if interest rates decrease the price will likely increase.
It is possible for a capital loss to be realised on eTBs if they're purchased at a price greater than $100, or sold prior to their Maturity Date.
Exchange-traded Treasury Indexed Bonds (eTIBs)
What are eTIBs?
'Exchange-traded Treasury Indexed Bonds' ('eTIBs') are similar to eTBs, except they are issued over Australian Government 'Treasury Indexed Bonds' instead of regular Treasury Bonds. Treasury Indexed Bonds are 'capital-indexed' bonds, meaning that the nominal value of the bond will be adjusted in line with the Australian Consumer Price Index (CPI).
Like Treasury Bonds, Treasury Indexed Bonds are generally issued in large parcel sizes and largely out of the reach of retail investors. They also pay Coupon Interest against the nominal (CPI-adjusted) value of the bond at a fixed rate every 3 months until the Maturity Date. The combination of fixed income and indexation makes Treasury Indexed Bonds an attractive option for large investors looking to protect against inflation.
eTIBs provide beneficial ownership of Treasury Indexed Bonds in the form of 'CHESS Depository Interests', providing exposure to Treasury Indexed Bonds while being accessible for retail investors. eTIBs provide all the economic benefits (including Coupon Interest and principal payments) attached to the legal ownership of the Treasury Indexed Bond it was issued over, with one eTIB unit giving beneficial ownership of $100 Face Value (the initial unadjusted value) of that Treasury Indexed Bond.
Where can I find a list of eTIBs?
You can find a full list of ASX-listed eTIBs, their ticker codes and the relevant term sheets by clicking here.
How are eTIBs linked to inflation?
When a Treasury Indexed Bond is issued, the Face Value and Nominal Value both start at $100. The face value of the bond will never change, but the Nominal Value will be adjusted in line with changes in the CPI. If inflation occurs and the CPI rises, the Nominal Value will increase. If deflation occurs and the CPI drops, the Nominal Value will decrease.
Changes in the CPI will impact the amount of Coupon Interest paid every three months, as well as the amount paid to the holder of the bond at the Maturity Date. This is because the Coupon Interest rate is paid against the Nominal Value, and not the Face Value.
Do eTIBs have any protection against deflation?
There is a floor on Coupon Interest payments designed to protect bond-holders against deflation. In the event that deflation occurs and the Nominal Value of an eTIB drops below the Face Value ($100), the Coupon Interest will be paid assuming a value of $100 regardless.
In the event that this floor is used, succeeding Coupon Interest payments and the principal payment at maturity will be reduced by the difference between the Coupon Interest paid and the payment which would have been made if the floor did not exist.
At the Maturity Date, an eTIB holder will receive either the Nominal Value or Face Value amount, whichever is greater. This limits the exposure of the bondholder to deflation.
How much interest is paid on eTIBs, and how is it paid?
Like with eTBs, the Coupon Rate paid on eTIBs will vary between individual bonds. Additionally, although Coupon Interest is paid four times yearly on all eTIBs, payment dates will vary between bonds. You can find this information in the term sheet, along with other important details such as the Maturity Date.
Coupon Interest on eTIBs is paid via direct credit (bank transfer) four times yearly. Like with eTBs, eTIB holders must nominate a bank account with the 'registrar' (Computershare) to receive their Coupon Interest payments.
What are some of the risks associated with investing in eTIBs?
Like eTBs, eTIBs are considered a highly secure investment. However, investing in eTBs does come with some risks.
The price of eTIBs are determined by the market and will fluctuate over time due to various influences, but it's most strongly linked to changes in interest rates. Typically, if interest rates increase the price of an eTIB will likely fall, and if interest rates decrease the price will likely increase.
It is possible for a capital loss to be realised on eTIBs if they're purchased at a price greater than the nominal (adjusted) value of the underlying Treasury Indexed Bond, sold prior to their Maturity Date, or there is a decline in the CPI.
How is income derived from eTBs and eTIBs taxed?
Any assessable income made from interest or capital gain will be liable to tax according to the
provisions of the laws of the Commonwealth and the Australian States.
If you invest in eTBs or eTIBs and do not provide details of your Tax File Number (TFN) or Australian Business Number (ABN) to the Registrar (Computershare), tax may be deducted from Coupon Interest Payments.
You will have the opportunity to provide your TFN or ABN when you contact Computershare to nominate a bank account to receive your Coupon Interest Payments.
If you require more information relating to taxation matters, you may want to speak with the Australian Taxation Office or a trusted tax professional.
Corporate Bonds
What are corporate bonds?
'Corporate bonds' are bonds issued by private companies for the purpose of raising capital. ASX-listed corporate bonds function somewhat similarly to eTBs, in that they pay regular interest up to the Maturity Date, at which point the full Principal Amount is paid out. The interest rate, frequency of these payments and the specific payment dates will vary depending on the individual bond.
Two types of corporate bonds are offered on the ASX - 'fixed-rate' and 'floating-rate'. Fixed-rate bonds pay a specific interest rate for the entire term of the bond until Maturity, meaning the interest payments will not fluctuate with changes in interest rates. Floating-rate bonds (also known as 'Floating Rate Notes') pay a fluctuating interest rate, usually tied to the '90 day bank bill swap rate' or 'BBSW' (a benchmark rate used by certain financial institutions). In most cases, the actual interest paid will include a fixed margin that puts the interest paid above the BBSW rate (e.g. BBSW plus 2.5%).
Where can I find a list of corporate bonds?
You can find a list of both fixed-rate and floating-rate corporate bonds, along with important information such as the interest rate, payment frequency and payment dates on the ASX website by clicking here (you'll need to click Corporate at the top of the page to view corporate bonds).
For further information on each bond, the ASX includes a link to the issuer's website on the information page for each bond (example below).
There are many different corporate bonds offered on the ASX, with significant differences existing between each. As such, it's important that you familiarise yourself with the prospectus or term sheet of an individual bond (usually available through the bond issuer's website) to familiarise yourself with its terms.
How is interest paid on corporate bonds?
The interest rate paid, payment frequency and payment dates on corporate bonds will vary between individual bonds. You can find more information on the ASX website or by referring to the bond issuer.
To receive interest or principal payments on bonds, you will need to nominate a bank account with the share registry managing that bond. You can find the share registry for a corporate bond in the same way you would for shares (i.e. searching for the ticker code on the ASX website and scrolling to the bottom of the page).
What are some of the risks associated with investing in corporate bonds?
All investments carry some risk, including corporate bonds. Typically speaking, a bond with a higher interest rate will be more speculative and carry a higher credit risk, while a bond with a lower interest rate will be considered less risky.
Fixed-rate bonds may also fluctuate in price depending on interest rates (an increase in interest rates will cause a decline in price while a decline in interest rates will lead to an increase in price).
The pricing of fixed and floating rate bonds is also sensitive to the perceived financial health and credit standing of the bond issuer.
It's also worth mentioning that there is a liquidity risk when trading corporate bonds, as some bonds (especially bonds with a small number of units on issue) may be difficult to sell quickly and easily if needed, due to poor liquidity on the market.
Additional Resources:
'Investor Information Statement - Exchange-Traded Treasury Bonds' (Australian Government)
'Investor Information Statement - Exchange-Traded Treasury Indexed Bonds' (Australian Government)
'List of eTBs' including term sheets (Australian Government)
'Bonds' information page, including eTBs, eTIBs and Corporate Bonds (ASX)