- Receive regular, stable income: Exchange-traded TBs provide you with a regular income stream. In comparison, returns from share investments fluctuate in line with the profitability of the company. Exchange-traded TBs are also considered to have the lowest credit risk of all Australian debt-based investments.
- Reduce risk through diversification: Exchange-traded TBs may help reduce risk and diversify your investment portfolio. By combining Exchange-traded AGBs and other investments such as shares, you may be able to maximise your return, while minimising risk.
- Avoid locking away your money: Exchange-traded TBs can be sold at any time the ASX market is open. This means your money is not locked away as with some other interest-earning investments.
- Choose from a wide range of investment terms: Exchange-traded TBs are available over investment terms to suit all strategies, from less than a year to more than 15 years.
Like all investment products, Exchange-traded TBs carry risks that you must understand before investing. These include interest rate risk, credit (or repayment) risk and liquidity (or ability to sell before maturity) risk. See key risks.
You should also review the ASX on-line course on Exchange-traded AGBs to familiarise yourself with the key features and risks of AGBs.
Trades settled after the close of trading on the Record Date are not entitled to receive the next coupon interest payment. The Record Date is the close of business on the eighth calendar day before the relevant Coupon Interest Payment Date or Maturity Date. If the Record Date is not a Business Day, then the preceeding Business Day becomes the Record Date.
Upcoming important dates including Record Dates, when the market commences trading on an ex-interest basis and Coupon Payment Dates for Exchange-traded Treasury Bonds.
Links to key information
- Security Type: CHESS Depositary Interest over Treasury Bonds.
Underlying Security: TBs issued by the Australian Government.
Face value: one unit holding of an Exchange-traded TB provides beneficial ownership of $100 Face Value of the Treasury Bond over which it has been issued.
Coupon: the interest paid to the holder. The coupon is expressed as a fixed percentage of the face value of the TB. For example a TB with a face value of $100 might pay a coupon of 6% per annum. This is $6 in interest per year. This amount is made up of two half-yearly payments of $3.
Coupon payment frequency: every six months.
Yield to maturity: the rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupons are reinvested at the same rate. Sometimes this is simply referred to as "yield" for short.
Maturity date: the expiry date of the TB when the face value is paid to the holder. Note that the quoting of an Exchange-traded TB ceases five business days prior to the final Record Date, which in turn is eight calendar days prior to the Maturity Date.
Market price: also known as the gross price, this is the total amount that an investor pays for a TB. The purchase price includes two components:
Capital price: the price of the TB as determined by the market based on a number of variables including interest rate and maturity date; and
- Accrued interest: the amount of interest that has been earned but not yet paid. Because interest is paid at regular intervals the TB price incorporates the amount of interest accrued each day. On a 6.0% annual coupon, interest accrues at 1.64 cents per TB per day. Immediately following the TB going ‘ex-interest’, the market price should adjust downwards approximately by the amount of that coupon payment.
More about Exchange-traded AGBs