Get to know Corporate Bonds

Fixed income covers a range of investment options, such as bonds and term deposits, which can provide low risk, reliable income stream and preserve capital. Fixed income provides investors with four key benefits – what we call the four pillars of fixed income investing.

Capital Stability

Capital stability

All Corporate Bonds are guaranteed by their issuers so, assuming the issuer remains solvent, they are contractually obliged to pay back the principal value to the bondholder.

Predictable cashflow

Predictable cashflow

Corporate bonds provide a regular income stream through coupon (interest) payments.

Diversity

Diversity

Diversifying a portfolio with fixed income spreads investment risk across a range of assets to help reduce the impact of any one investment.

Liquidity

Liquidity

There is a deep and active market for secondary trading of most fixed income securities in Australia so you can sell prior to maturity if needed.

Corporate bonds

A Corporate Bond is a loan from an investor to an issuer (such as the government, a bank or corporation). When you purchase a bond, the bond issuer is legally obliged to pay you regular interest and at the bond’s maturity, the face value of the bond (which is the price the bond was issued at) must be returned to you.

Bonds can be traded by investors after they have been issued and before they mature.

There are many types of bonds including fixed, floating and inflation linked bonds. A balanced portfolio will include different weightings of these three types of bonds, depending on your expectations for interest rates and inflation

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How to invest in Corporate Bonds

You can invest directly in Corporate Bonds through FIIG. It’s accessible, straightforward and transparent. There are two options, depending on how much time you want to spend thinking about your choice of Corporate Bonds.

  1. DirectBonds

    Our DirectBonds service enables you to buy and sell over 300 Corporate Bonds from as little as $10,000 per bond.  With DirectBonds, you’re in control and can choose the Corporate Bonds to suit your investment goals.

  2. Managed Income Portfolio Service (MIPS)
  3. If you want direct access to the Corporate Bond market but don’t have the time or expertise to make these decisions, MIPS combines the benefits of owning Corporate Bonds directly with the services of a professional portfolio management team.  You still directly own your Corporate Bonds but FIIG constructs and manages the portfolio to match your investment goals and risk appetite.

Frequently asked questions

Bonds are issued by many companies – from well known companies such as BHP, Qantas and Commonwealth Bank to smaller companies such as G8 Education and Praeco.

Over 300 bonds are available via FIIG’s DirectBonds Service. Wholesale qualified investors can also invest in foreign currency denominated bonds, including USD, GBP and Euro bonds.

When you purchase shares in a company, you become a part owner of that company and there’s no certainty of income via dividends. With corporate bonds, you lend money to the company that issues the bond and it is legally required to pay you regular interest and repay the face value of the bond when the bond matures. This means that investing in a company’s bond is a lower risk than owning its equity or shares.

Another major difference between shares and bonds is that shares are generally traded on an open exchange such as the ASX, whereas the majority of corporate bonds are traded on the Over the Counter market.

Australian bonds have outperformed cash and Australian shares in the 10 years to December 2015:

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Source: Gross returns for 10 years to December 2015, ASX 2016 Long term Investing Report May 2016.

Bond rates

Fixed income is primarily an over the counter (OTC) market, meaning there is no one single market clearing value as you would find on the stock exchange for equities.  As part of our commitment to making direct fixed income investing accessible to investors, FIIG is taking the lead in ensuring that we are providing the same level of market transparency to all investors that has been traditionally available only to institutional investors.

The rate sheet is designed to provide a snapshot of institutional market mid-point prices and yields (rates) that institutions who trade in $500,000 parcels can access.

The rate sheet is designed to provide a snapshot of institutional market mid-point prices and yields (rates) that institutions who trade in $500,000 parcels can access.

For more information on Corporate Bonds 

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George Cupac -  State Manager Markets - Victoria Kate Hurse - ‎NFP cash management and investment specialist John Sheridan - Head of Private Clients NSW/ACT Mark Connors - State Manager Mark Mccudden - Director –NSW, ACT, QLD  Adviser Services  

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