Exchange-traded Treasury Indexed Bonds (TIBs) are a type of Exchange-traded Australian Government Bond (AGB). They are medium-to long-term debt securities. Their face value is adjusted for movements in the Consumer Price Index (CPI) and interest is paid at a fixed rate, on the adjusted capital value. At maturity, investors receive the face value of the security adjusted for CPI movement over the life of the bond.
See the full list of available TIBs, their ASX codes, term sheets and market price charts.
- Receive regular, stable income: Exchange-traded TIBs provide you with a regular income stream. In comparison, returns from share investments fluctuate in line with the profitability of the company. Exchange-traded TIBs are also considered to have the lowest credit risk of all Australian debt-based investments.
- Reduced risk through diversification: Exchange-traded TIBs may help reduce risk and diversify your investment portfolio. By combining exchange-traded TIBs and other investments such as shares, you may be able to maximise your return, while minimising risk.
- Avoid locking away your money: Exchange-traded TIBs 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 TIBs are available over investment terms to suit all strategies, from less than a year to more than 15 years.
- Hedge against inflation: the face value of an Exchange-traded TIB is automatically adjusted for movements in in the Consumer Price Index (CPI), meaning the value of your investment is protected from the effects of inflation.
Like all investment products, Exchange-traded TIBs 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, the day when the market commcences trading on an ex-interest basis and coupon payment dates for Exchange-traded Treasury Indexed Bonds.
- Security type: CHESS Depositary Interest over Treasury Indexed Bonds (TIBs).
- Underlying security – TIBs issued by the Australian Government.
- Face value: one unt holding of an Exchange-traded TIB provides beneficial ownership of $100 Face value (the Principal or par value of the bond, unadjusted for changes in the CPI) of the TIB over which it has been issued. The Face value is adjusted for movements in the CPI (inflation accrued). For example, if the Face value of a TIB at the original issue date is A$100 and the annual increase in the CPI (lagged six months) is 3%, then the face value after one year would be adjusted to A$103. The price of a TIB can be expected to reflect this adjustment to the Face value. At maturity, you receive the adjusted Face value.
- Coupon: the interest paid to the holder. The coupon is expressed as a fixed percentage of the face value of the TIB. For example a TIB with an adjusted face value of $120 and a coupon of 4% per annum would pay coupon interest of $1.20 for the next coupon. The value of the coupon will adjust as the Face Value adjusts.
- Coupon payment frequency: quarterly (every three 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, face value and expected past and future adjustments as a result of movements in the CPI, 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 TIB when the face value is paid to the holder. Note that the quoting of an Exchange-traded TIB 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 is the amount that an investor pays for a TIB. The purchase price includes four components:
- Face value: see above;
- Inflation accrued: the effective adjustment factor applied to the TIB's Face value to reflect movements in the CPI;
- Accrued interest: the amount of interest earned but not yet paid. Because interest is paid at regular intervals, the TIB price incorporates the amount of interest accrued each day. On a 4.0% annual coupon where the CPI adjusted face value is A$120.00, interest accrues at 1.315 cents per TIB per day. This amount will vary based on changes to the TIB’s face value as a result of adjustments due to changes in the CPI. Immediately following the TIB going ‘ex-interest’, the market price should adjust downwards by the approximate amount of that coupon payment.
- Premium/discount: a TIB is selling at a premium when its market price is greater than it's face value. It is selling at a discount when the market price is below its face value.
Links to key information
- Exchange-traded TIB Information Statement and term sheets
- Exchange-traded Treasury Bonds (TBs)
- Key risks
- Settlement and the role of CHESS
- Comparing bonds
- ASX Bond Calculator
- List of Exchange-traded AGBs - including ASX codes, term sheets and market price charts
- Online course on Exchange-traded AGBs
- Market reports and key information