Types of Government Bonds
There are two different types of Exchange-traded AGBs:
The primary source of information about Exchange-traded AGBs are the Information Statements provided by the Australian Government. The Information Statements can be downloaded from the links below:
- Exchange-traded Treasury Bonds information statement;
- Exchange-traded Treasury Indexed Bonds information statement; or
- The Australian Government website.
You should read them in full before investing in Exchange-traded AGBs.
You can buy or sell Exchange-traded AGBs on ASX the same way you buy or sell shares. You instruct your broker to place an order, either by phone or online. Brokerage will be payable on the transaction. Settlement of the trade takes place two settlement business days after the transaction (T+2 including the trade date).
Holding in CHESS
All Exchange-traded AGBs must be held in your CHESS Account of your sponsoring broker. Your CHESS Account has a Holder ID Number (HIN). It is not possible to hold AGBs as an issuer sponsored holding. Whenever you buy or sell an AGB during any month period, you will receive a CHESS Holding Statement indicating the holding balance for that particular AGB. You will also receive a CHESS Holding Statement following the maturity of any ABG which was held.
Holders of Exchange-traded AGBs are paid regular coupon interest. This is based on the coupon rate of the AGB, and remains in effect for the life of the bond, even as its market price fluctuates.
Investors who hold Exchange-traded AGBs at the close of business on the Record Date (eight calendar days prior to the Coupon Interest Payment Date) will be entitled to the next coupon interest payment. The settlement period between the Record Date and the Coupon Payment Date is known as the ex-interest period. Trades which settle during this period are not entitled to the next coupon interest payment.
On Market Reports and key information, you can find reports on important dates such as when AGBs go ex-interest, pay coupons and mature.
Exchange-traded AGBs settle on a T+2 basis (e.g. settlement occurs two business days after trading including the trade date), which means you must purchase an AGB two business days prior to the Record Date (including that day) to be eligible to receive the next coupon payment. At the beginning of trading two business days prior to the Record Date (including that day), the price of the bond will adjust downwards to reflect the fact that a purchaser of the bond is not entitled to the next coupon interest payment. This is similar to a share going ex-dividend.
There are two ways to recoup some or all of your initial investment:
- Redemption at maturity: Redemption takes place at maturity, with the AGB’s face value (adjusted in the case of a TIB) and final coupon paid directly into your bank account. Coupon payments and redemptions cannot be made by cheque.
- Selling the bond before it matures: Selling an AGB is no different to selling shares. You can sell at any time the market is open. Depending on the current market price, you may receive more or less than face value. ASX has appointed dedicated market makers to provide attractive bid and ask prices.
Note that the quoting of an Exchange-traded AGB ceases five business days prior to the final Record Date, which in turn is eight calendar days prior to the maturity date. Cessation of quotation report.
The Australian Government’s preferred method of payment to all investors is by direct credit into an Australian dollar bank account with a financial institution in Australia. Australian, United States, Great Britain, New Zealand and Canadian resident investors must nominate a valid Australian bank account, otherwise payments will be withheld until such time as a valid account is provided. Payments to investors that reside outside the above-mentioned jurisdictions will be made by paper cheque where a valid account has not been provided. Investors are required to supply their payment instructions no later than the record date in order to receive their payment.
The actual taxation consequences of acquiring, holding and disposing of Exchange-traded AGBs will vary depending on the particular circumstances of the holder. To assist, Deloitte has prepared taxation information for investors relating to Exchange-traded AGBs.
Non-Australian resident investors
Coupon Interest Payments on Exchange-traded AGBs are eligible for exemption from non-resident interest withholding tax provided the Treasury Bonds over which the bonds have been issued satisfy the 'public offer test'. Unless otherwise announced at the time of issue, the Australian Government will seek to issue Treasury Bonds and Treasury Indexed Bonds in a manner that satisfies the 'public offer test'. See the Australian Government's taxation information in the information statement.