Fixed Interest

Understanding the terms and the return of fixed income securities or interest rate securities as they are frequently named can be confusing. This article provides a guide that should help you to understand some of the different features of the investments and how to interpret the returns quoted, and includes a list of key definitions.

Shareholders have been spoilt by Telstra and big banks in recent years and can be forgiven for thinking the stocks can act like bonds. These shares, often tagged as “bond proxies”, have been consistent and delivered high income with franking credits making them broadly appealing to many investors. But recent history tells us you can’t rely on shares for income or capital preservation and so they should never be thought of as proxies for bonds.

There’s something innately attractive about property. It’s tangible; it can be beautiful or have cultural, historical or sentimental value. Coupled with attractive negative gearing benefits for high income earners, the asset class has a lot going for it. 

On Monday, the Australian iTraxx – our local proxy for credit spreads – reached a new post GFC low of 71 basis points. Simply, this measure represents an average additional margin that investors expect to be paid for investing in an investment grade bond issue.

Disruptors are coming thick and fast and investors unaware of technological and social changes will be left taking stock of losses, wondering how tried and tested high dividend payers started losing ground to new, more agile technological adopters.

Just now we are hearing many fund managers suggest the sharemarket has become expensive — at the same time cash deposits continue to pay very low returns.

Most of the downgrades applied to regional banks such as AMP, Bank of Queensland, Bendigo and Adelaide Bank, Credit Union Australia and ME Bank.

Airports offer a runway to prosperity through predictable, steady returns

The residential property merry go round is always good, until it stops. Just ask some Perth home owners and investors.

The US Federal Reserve has finally increased interest rates from a range of 0.5 to 0.75 percent to 0.75 to 1.0 percent. It’s a long awaited and relatively significant increase, but looking back to early 2016 it’s taken a lot longer for the Fed to move than most market pundits expected.

After what seems like a break, the popular hybrid note market is back in action.

You don’t have to borrow big or worry about falling prices to invest in property. Property companies issue corporate bonds and they can be a great alternative – here are ten reasons why you might invest in a property bond instead of direct investment with a mortgage

It’s interesting then to consider how some of the bigger institutions are coping with low rates and how they are changing their asset allocations to try and improve returns, while limiting risk. Watching these larger corporations with dedicated research teams and global asset managers, helps identify trends that smaller investors can replicate.

A few years ago Glencore, a diversified multinational commodity trading and mining company, issued a bond in the domestic market for the first time. At that time, the company had a market capitalisation of around $50 billion, and was the nation’s largest coal producer through its Australian subsidiary Glencore Xstrata.

They appear to be mimicking US commentators whose comments relate to US government fixed rate bonds. In that context, I agree there is scope to describe the market as in a “bubble”. These bonds known as US treasuries have very low yields with three year bonds returning 0.96 percent and ten year, 1.62 percent. If the US Fed increases interest rates, these bonds will lose value.

The three types of bonds available – fixed rate, floating rate and inflation linked – offer compelling protections that term deposits do not