Anyone buy bonds or interest rate securities for income?

Space Invader101 · 25 March 2010

I read about bonds on an ASX turtorial on the ASX website. It seems to explain them, but not how to buy them or where to get information on what's available to investors

How exactly do you buy bonds or interest rate securities?
Could I just buy them off the secondary market through a share trading brokerage account?
How do I find out when and what's coming up on the primary market?
If I buy from the secondary market, do I get the face value from the primary market on maturity and how do I find that out?

Errr · 2 April 2010

The information for investors is in the bond prospectus provided by the underwriters of the bond and/or the issuer.

1. You can buy bonds and interest rate securities though a broker just like equities or most other securitys.

2. Interactive brokers will execute for US bonds. I'm not sure about any AUS issues though. If you search though a list of brokers you will find one that will though.

3. You can access the primary market through retail issues. However since most primary issues go to institutions, unless you have a large amount of capital to offer they're not really for retail consumption due to the size of placements.

4. You get the face value at maturity. However on the exchange any issue may trade at a discount or premium depending on a variety of factors. Some factors are: the relative size of the coupon w.r.t current market yields, the issuer's credit worthiness, embedded options, and the business cycle.

Gunlom · 3 April 2010

I have a couple of hybrid bonds and I keep my eye on the market from time to time.

A great place to start is

fixedincome com au

loads of free research, sign up for the monthly research... handy site for all sorts of hybrid and fix rate bonds info ... worth a look if you interested in this market

boofhead · 3 April 2010

RBA sells direct to public for federal govt bonds.

Space Invader101 · 4 April 2010

I'll definitely check out fixedincome com au

Tyler Durden · 27 October 2012

I have started looking into corporate bonds in the secondary market and wanted to ask some questions, thought it'd be better to try to keep it in one thread rather than start a new one.

When I go to the ASX website for corporate bonds, I see this:

So my questions are:

1. Are there really only 4 corporate bonds available for trading? I know the list for Floating Rate Notes is longer, but I was surprised there's only 4 corporate bonds.

2. I am not too sure what the information actually means - if I buy one HBSHA for $107.85, does that mean the interest I get on that is 10% of $107.85? Or is it 10% on $100?

3. You'll see the highest coupon rate is 10% for HBSHA...does one simply go for the highest coupon rate??

4. I am with Comsec - is it really as easy as logging in, typing in HBSHA, clicking buy, just like shares? Is there a minimum amount I need to buy?

5. Is it somehow nonsensical to own shares in a company and also corporate bonds in the same company? Theoretically, aren't I just borrowing money from myself? Sorry, I know that sounds stupid, but I am just trying to make sense of the positions of a shareholder and a bond holder.

6. How do I know if these bonds are secured or unsecured?

drsmith · 27 October 2012

Tyler Durden said:
2. I am not too sure what the information actually means - if I buy one HBSHA for $107.85, does that mean the interest I get on that is 10% of $107.85? Or is it 10% on $100?

3. You'll see the highest coupon rate is 10% for HBSHA...does one simply go for the highest coupon rate??

2. The coupon will be on the face value of the bond. Your graphic does not display the face value, but it typically differs to some extent from the market price (see below).

3) The market will price the bond in accordance with underlying interest rates and entity specific risk. If for example, broader interest rates have declined since the issue of the bond and the entity is performing well, the market will price a lower interest rate than the coupon rate over the remaining life of the bond. This is reflected in a market price of the bond above its face value.

The market price can of course go the other way as well.

Tyler Durden · 27 October 2012

drsmith said:
2. The coupon will be on the face value of the bond. Your graphic does not display the face value, but it typically differs to some extent from the market price (see below).

3) The market will price the bond in accordance with underlying interest rates and entity specific risk. If for example, broader interest rates have declined since the issue of the bond and the entity is performing well, the market will price a lower interest rate than the coupon rate over the remaining life of the bond. This is reflected in a market price of the bond above its face value.

The market price can of course go the other way as well.

Hi, thanks drsmith. Do you know where I can find the face value? Why don't they make the face value information readily available??

drsmith · 27 October 2012

Tyler Durden said:
Hi, thanks drsmith. Do you know where I can find the face value? Why don't they make the face value information readily available??

Search the bond code on the ASX's site and you will get information on the underlying company.

HBSHA for example gave this,

http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=HBS

Then look under Securities Issued and you will see HBSHA listed as having a 10%pa coupon as per your table.

Having identified the underlying company, they should have more detailed information on all their issued securities.

McLovin · 27 October 2012

Tyler Durden said:
1. Are there really only 4 corporate bonds available for trading? I know the list for Floating Rate Notes is longer, but I was surprised there's only 4 corporate bonds.

No, they're the bonds that are listed on the ASX. Most bond trading in Australia is OTC. A bond broker will be able to let you know rates and issuers. If you're going to be buying and selling a couple of grand worth of bonds, I probably wouldn't expect them to return your phone call. Even the "retail" bond brokers usually have fairly high minimum order requirement (~$50k/transaction).

Tyler Durden said:
3. You'll see the highest coupon rate is 10% for HBSHA...does one simply go for the highest coupon rate??

That depends. Does one simply go for the stock with the highest dividend yield?

Tyler Durden said:
5. Is it somehow nonsensical to own shares in a company and also corporate bonds in the same company? Theoretically, aren't I just borrowing money from myself? Sorry, I know that sounds stupid, but I am just trying to make sense of the positions of a shareholder and a bond holder.

It doesn't make sense to me. If you done your analysis and found a company that you think has good prospects then why would you want to put your finite capital into a security that will not share in any upside? On the other hand if you find a high credit quality utility with little organic growth but reliable debt repayments then why buy the equity?

Tyler Durden said:
6. How do I know if these bonds are secured or unsecured?

The offer document.

Country Lad · 8 July 2013

If buying bonds to park cash somewhere better than manged funds, the best is to get in at the ground floor during the book build so there is no brokerage and the possibility a bit of capital gain.

For example, I have HBSHB face value $100, last sale $106.50 and paying 7.25% quarterly.

There is book build underway at the moment for ANZPD for which I have put in an order to park some idle cash and worth a look if you similarly want better than bank rates. Book build margin will be BBSW plus 3.4%. You need to check for yourselves whether these suit you.

ANZ Capital Notes (ANZPD)
Issuer: ANZ Bank
Issue: ASX code ANZPD
Face value: $100
Estimated offer size: $750m
Bookbuild margin: 3.40-3.60%
Franking: 100%
Dividend payments: Half Yearly
Minimum application: $5,000
Optional exchange: 1 Sep 2021
Mandatory conversion: 1 Sep 2023

Cheers
Country Lad

kid hustlr · 8 July 2013

Just a reminder that going through the book build wont always ensure you get your full allocation.

Country Lad · 8 July 2013

kid hustlr said:
Just a reminder that going through the book build wont always ensure you get your full allocation.

That will likely occur with these as well. i have asked for 2000 units expecting to get 1200. If I get them all I can either sell them on market or let my broker allocate them to another of his clients.

Cheers
Country Lad

sydboy007 · 8 July 2013

Just a gentle reminder to everyone that Hybrids are not bonds.

Most hybrids are non cumulative, so missing interest payments are lost.

There's still some corporate debt out there offering in the 6-7% yield which compares OK to a lot of hybrids.

I hve about 1/2 of my SMSF in bonds now, and another 30% in hybrids. been good the last month to see the market fall off it's perch and barely any decline in the value of my portfolio.

I'm happy to get around CPI+ 4% with minimal risk. Compounding like that over the next 20 years will let me build up a tidy nest egg.

Anyone buy bonds or interest rate securities for income?

Space Invader101

Errr

Gunlom

Gunlom

boofhead

Space Invader101

Tyler Durden

drsmith

Tyler Durden

drsmith

McLovin

Country Lad

Off into the sunset

kid hustlr

Country Lad

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sydboy007

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Anyone buy bonds or interest rate securities for income?

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