Hi All,
I am just seeking your opinion. Although our savings account is insured to 250K, I was confused if the situation in Silicon Valley Bank US can happen here, particularly with the smaller banks trying to take deposits by offering sometimes 1-2 % more than the bigger banks.
Can you please guide how can I invest in Australian govt bonds as a retail investor?
that's subscription article so can't read.
Retail investors can, however, more easily buy government bonds on the secondary market through the ASX via instruments called exchange-traded bonds. The ASX includes a list of bonds that can be purchased and the relevant tickers – and market makers are committed to giving investors prices that are in line with wholesale markets.
that's what i said in my below comment… one can buy on asx but there is premium to pay for bond with high interest rate while those those with lower interest rate traded at discount… .. !
this is the link to check current bond rates. surprisingly there isn't any really good bond with high interest rate with long maturity at the moment… !
what government should be doing it is allow citizen to purchase bond directly from RBA with minimum investment amount but without premium so that way common citizen get benefit of bond not the insto and wholesale market makers in my opinion.
https://www2.asx.com.au/markets/trade-our-cash-market/equity…
@SydBoy: I would much prefer that governments sell bonds at the lowest possible interest rate with the lowest transaction costs.
@Baysew: why???
there is no transaction cost buying bond from RBA IF they start selling directly to consumers but obviously they should keep minimum amount such as 50k or 100k in order to buy directly from RBA .
how did you generate this link? it can let me read article without subscription… Thanks
@SydBoy: You put 12ft.io/ in front of any article behind a pay wall
Doesn't work with all sites, but it does with a lot of them (afr included)
I think retailer can buy bon online as some of the government bond are traded electronically same as shares but problem is that those with high coupon rate are sold at premium so basically your net return / yield will be lower then actual coupon rate.
sad thing is that Australian government don't allow retail investor to directly buy bonds unlike some of the other country where retail investor can buy bond directly from RBA subject to minimum amount investment.
You need to do more research into bonds.
The coupon rate is largely irrelevant. You need to calculate 'Yield to Maturity'.
If a bond has a high coupon rate, its purchase price will be high (hence yield to maturity will be lower than coupon rate).
If a bond has a low coupon rate, it purchase price will be low (hence its yield to maturity will be higher than its coupon rate).
But in both cases the yield to maturity will be about the same (comparing Australian Government Bonds only, not across corporate bonds, etc…).
I don't know much about bonds, but likely more than most people.
Government bonds are exposed to duration risk, hence the price of the bond changes as interest rates change (longer dated bonds are more affected).
As you will be purchasing them on the secondary market, you may be purchasing at either a discount or premium to face value (hence will trigger a CGT event on disposal / maturity).
Further, if you need to sell them prior to maturity, you could potentially make a loss (as interest rates go up their market price will go down).
If you are interested in investing in bonds, you should do you research, and make sure you understand what you are getting yourself into.
Some basics on bond risks: https://www.investopedia.com/articles/bonds/08/bond-risks.as…
For those that are looking for a higher rate return, with an investment manager, I would consider Coolabah Floating-Rate High Yield Fund (Managed Fund):
https://coolabahcapital.com/floating-rate-high-yield-strateg…
If you worth under 250K - don't bother, you are covered.
Silvergate depositors will get their money (at least insured amount) - FDIC already taken over and will work quickly on that.
Same scenario will be playing out here, at least with the fist couple of institutions.
How you can buy - easiest way through ETF, just google it, there are plenty. Duration risk might be a surprise.
You can buy ETFs that invest in government bonds only eg VGB.
But you get a lower return than bank accounts. If you are particularly worried then split your money do you have, say, no more than $50k in one bank
Thanks, everyone for taking the time and replying. It has certainly enlightened me on this topic
How to buy bonds on the ASX (and why you might want to)