Comparing Exchange-traded AGBs
Two different rates of return are commonly used to evaluate AGBs:
- Coupon rate; and
- Yield to maturity (or "YTM")
Coupon rate measures the income you receive throughout the life of the bond. Yield to maturity is the average annual return an investor would receive if the security is held to maturity. The calculation includes total payments, reinvestment of interest, current market price and time to maturity. Evaluating the return you will make is an essential part of investment due diligence. With Exchange-traded AGBs, returns are made up of defined income payments throughout the life of the investment (coupons) and the repayment of face value at maturity.
Learn more about prices, yields and comparing different bonds by reading the new ASX booklet 'Understanding bonds' and doing the free online ASX education course on Exchange-traded AGBs.
Comparing AGBs using coupon and yield
Yield to maturity is usually considered to be the most helpful indicator of value. Comparing bonds on the basis of coupon rate alone does not take into account the market price of the bond, reinvestment of interest or the return of its face value at maturity. Yield to maturity captures income payments, reinvestment of interest, capital gain/loss relative to the market purchase price and time to maturity, enabling you to compare AGBs and other interest rate investments with different maturity dates, coupons and market prices.
However, the calculation of yield to maturity is not as simple as the calculation of the coupon interest. ASX has a user friendly bond calculator to help you work out the yield to maturity based on the bond's maturity, market price and coupon rate. View the complete list of Exchange-traded AGBs including their price and yield to maturity.
- Exchange-traded TB information statement from the Australian Government
- Exchange-traded TIB information statement from the Australian Government
- More about Exchange-traded Treasury Bonds (TBs)
- More about Exchange-traded Treasury Indexed Bonds (TIBs
- Key risks
- Settlement and the role of CHESS
- ASX Bond Calculator
- List of Exchange-traded AGBs - including ASX codes, term sheets and charts
- 'Understanding bonds' - booklet *new*
- Online course on Exchange-traded AGBs
- Market reports and key information.