We have decent supply in a range of retail bonds at the moment. If you have some ‘lazy’ cash available, now might be a good time to consider investing for a higher return. We list 13 bonds with a mix of investment grade and high yield.
It is often hard to source retail bonds, however we have plenty at the moment – in both high yield and investment grade. Minimum investment is generally $10,000 per bond.
A series of new issues – NEXTDC, Plenary, NextGen, Axssesstoday and RMBS lines – has seen investors sell some of their current holdings in order to participate. This has created opportunities for retail investors.
The recent uptick in short term BBSW (see the note ‘Interest rates are moving even though the cash rate isn’t’) has resulted in higher yields.
In fact, many of the FIIG originated bonds are at prices not seen in the last 12 months, making them attractive propositions.
Several of the high yield bonds have less than two years until maturity. The shorter terms to maturity lower risk in two ways:
- Potential higher interest rates have a lower impact for shorter dated fixed rate bonds compared to longer dated fixed rate bonds – meaning there’s limited price downside as the bond will naturally ‘pull to par’, that is its $100 face value as it approaches maturity.
- Reduced credit risk as it’s much easier to gauge the credit risk for a company over a couple of years than over a longer term of seven years or more.
Retail high yield bonds
| Issuer | Maturity/call date | Bond type | Yield to worst* | Minimum investment amount |
|---|---|---|---|---|
| Aviation Training Investments | 13-Nov-20 | Fixed | 3.74%pa | AUD10,000 |
| Cash Converters | 19-Sep-18 | Fixed | 6.65%pa | AUD10,000 |
| CML Group | 18-May-20 | Floating | 4.43%pa | AUD10,000 |
| Dicker Data | 26-Mar-20 | Floating | 4.90%pa | AUD10,000 |
| IMF Bentham | 30-Jun-20 | Fixed | 3.75%pa | AUD10,000 |
| Impact Group | 12-Feb-21 | Fixed | 6.93%pa | AUD10,000 |
| PMP | 17-Sep-19 | Fixed | 5.71%pa | AUD10,000 |
| SCT Logistics | 24-Jun-19 | Floating | 4.91%pa | AUD10,000 |
| StockCo | 6-Oct-21 | Fixed | 5.84%pa | AUD10,000 |
| Sunland | 25-Nov-20 | Fixed | 6.37%pa | AUD10,000 |
| WA Stockwell | 29-Jun-21 | Fixed | 6.41%pa | AUD10,000 |
*Yield is accurate as of 10 July 2018, subject to change.
Note: Yield to worst is the worst possible return
Shorter dated investment grade bonds are offering low yields that are less attractive, but you are taking much lower risk. We would still suggest you hold circa 70% investment grade bonds in your portfolio.
Retail investment grade bonds
| Issuer | Maturity/call date | Bond type | Yield to worst | Minimum investment amount |
|---|---|---|---|---|
| Adani Abbot Point Terminal | 29-May-20 | Fixed | 4.45%pa | AUD10,000 |
| Bendigo and Adelaide Bank | 9-Dec-26 | Floating | 3.52%pa | AUD10,000 |
| DBCT Finance (Dalrymple Bay) | 9-Jun-26 | Floating | 6.52%pa | AUD10,000 |
| Praeco | 28-Jul-22 | Fixed | 3.91%pa | AUD10,000 |
| Sydney Airport | 20-Nov-20 | Inflation linked | CPI +2.15%pa | AUD10,000 |
| Sydney Airport | 20-Nov-30 | Inflation linked | CPI +2.47%pa | AUD10,000 |
Yield accurate as of 10 July 2018, subject to change.
Note: Yield to worst is the worst possible return
