BondIncome was set up by the Cashwerkz group to provide greater access to corporate bonds for wholesale investors (certified by their Accountants) and eligible Australians including Financial Advisers (with wholesale clients) and Investment Policymakers.
Combining first-class fixed income and bond broking expertise, state-of-the-art trading technology and external leading market research from BondAdviser, BondIncome provides greater access and transparency to the corporate bond market for eligible investors.
It’s our goal to upskill and inform investors on current fixed income market indices and trends, aiding investors to make better decisions and earn better risk-adjusted returns.
Open your free BondIncome account and Talk to a BondIncome specialist today here.
Invest in bonds today for a better tomorrow.
- Access to global fixed income markets including foreign exchange capability.
- Over the counter and ASX listed debt security execution.
- Access to new issues from a broad suite of issuers (Investment grade, sub-investment grade and non-rated issues).
- In-house bond market commentary provided by Bond income’s team of specialists.
With fair and competitive pricing, new investors can enjoy:
- No custody fees forever for investors who open accounts in 2020.
- No fees when transferring from one custodian to another when opening a Bond income account and switching from another provider.
- Receive a complimentary subscription to weekly and monthly leading market research by BondAdviser.
Our investors are comprised of sophisticated and wholesale investors, Financial Advisers with wholesale clients, and the investment policymakers of councils, not-for-profits and corporates.
Most over the counter (OTC) wholesale securities can only be traded by wholesale investors because they are designed to cater to more experienced investors. As such, they have fewer compliance obligations and less regulatory requirements under ASIC (The Australian Securities & Investments Commission). The rationale behind that is that people who are considered wholesale investors are more likely to be able to evaluate interests in an investment without needing the protection of a regulated disclosure statement like a Product Disclosure Statement (PDS).
Buy & Sell Bonds with BondIncome.
Once your investment account is set up, your BondIncome Relationship Manager will require a written instruction from a registered email address authorised to transact bonds on the nominated account.
Bonds are tradable securities with the majority of transactions occurring in an over the counter (OTC) market. An investor wishing to buy or sell a bond will need to engage a broker to act on their behalf. A broker, such as Bond income, will need to physically match a buyer with a seller for a trade to occur. Much the same way as a real estate agent might facilitate the purchase and sale of a house.
Once a bond purchase is executed on your behalf, you will receive a Contract Note detailing the terms of the trade and the settlement instructions for payment. You have a few options to fund your bond transactions.
- Direct debit your nominated account. Funds will be direct debited from your nominated account the day after the trade has been executed (T+1).
- If you have an existing Macquarie Cash Management Account you can give Bond income a third party authority to debit your account to fund transactions
- We can set up a Macquarie Cash Management Account with a third-party authority to debit the account to fund transactions.
Coupon payments and capital gains on bonds are generally subject to tax in Australia. It is important for investors to seek independent tax advice specific to their circumstances.
BondIncome sends a monthly holdings statement with independent valuations for the securities held in your portfolio. You can also contact your relationship manager for any queries on your holdings.
For Over the Counter (OTC) securities, you must hold these with a licenced custodian. Your custodian has several responsibilities. These include:
- Maintain the registry of your holdings
- Issue your coupon payments
- Provide transaction, income and valuation reporting
- Advise you of notifications and voting concerning your holdings
You can use BondIncome’ custody service or nominate your own custodian.
As a licenced custodian, BondIncome’ can provide you with a cost-effective market-leading custody service. In addition to traditional custody and settlement services, we will allow you to transact and hold bonds in parcel sizes smaller than what institutional investors require.
Alternatively, you can nominate your own custodian, but the option of small parcel sizes may not be allowed and could come at a greater cost.
In the interest of providing clients with a sustainable safe service for your assets, BondIncome will recover costs charged by our service providers.
Fees will be calculated on the basis of 10 basis points per annum on the aggregate value of your portfolio. Valuations will be from an independent provider, ICE, and calculated on holdings on the last business day of the month.
A minimum fee of $10 per month will apply if the basis point fee is lower.
For all new customers in 2020, custody fees will be waived for their lifetime as a Bond income customer. *T&Cs apply.
BondIncome outsources custody functions to Mainstream, who in turn uses custodial account services provided by J.P. Morgan. The register of your holdings is maintained by Mainstream, a licenced custodian, who will also administer your coupon payments and settlements. Your holdings are held in segregated client trust.
BondIncome will also hold a register of your holdings and is a licenced custodian.
Mainstream has no claim or agency over your investments. All assets are held with JP Morgan.
In the event Mainstream were to become insolvent and cease operation, Bond income as a registered custodian and keeper of the book of records would provide custodial services.
Each month, BondIncome will provide you with a client report that summarises your current settled holdings valuations and any fees incurred. Your June report will contain all transactions and coupons for the financial year, in addition to your current holdings and valuations.
Fixed Income Investment FAQs.
A bond is a type of security issued by an entity (such as a government or corporation) as a means of raising funds. Issuing a bond enables the entity to raise amounts directly from investors.
As a buyer of a bond, an investor is effectively lending their money to the entity at an agreed rate of interest for an agreed period. Interest is paid to the investor at regular intervals throughout the life, or “term” of the bond until the bond matures, at which time the investor will receive their principal back. These regular payments (called “coupons”) provide a predictable stream of income, making bonds an ideal investment for those looking for a regular, reliable income stream as well as capital preservation.
Bonds come in a variety of forms, the two most common are:
1. Fixed-Rate Bonds.
As the name suggests, these bonds pay a fixed rate of interest that is set at the time of issue. Each coupon payment will be the same throughout the life of the bond, meaning that the income stream is predictable and affords the investor the ability to reliably plan for the future.
Fixed-rate bonds have an inverse relationship with interest rates, meaning that as rates rise the price of the bonds falls. Conversely, if rates were to fall, the price of the bonds would rise. Because the bond’s coupon can’t change, the price must move in order to reflect changes in the overall market.
2. Floating Rate Bonds.
Floating rate bonds pay variable coupons that are linked to a variable benchmark, such as the Bank Bill Swap Rate (BBSW). A floating rate bond has a fixed margin (called a ‘coupon margin’) that is set at the time of issue. This fixed margin is then added to the variable benchmark for a given period to calculate the coupon for that period.
As the BBSW will rise and fall with the overall market’s expectations for interest rates, so too will the coupon’s paid by the bond throughout its life. The price of a floating rate bond is less sensitive to interest rate risk because, unlike a fixed rate bond, the coupons can change to reflect market expectations for interest rates.
All investments carry some level of risk. However, bonds are inherently less risky than some other investment options such as shares. As a bondholder is effectively lending their money to the entity, they are a creditor of that entity. Creditors rank higher in the capital structure than equity holders, meaning that if the entity becomes insolvent, creditors are paid first ahead of the equity holders in the event of a company wind-up.
Bonds are fundamentally different from shares in that they rank on opposite ends of the underlying company’s capital structure.
A shareholder is an owner of the company and occupies the lowest, or riskiest, rung on the capital structure ladder.
Conversely, a bondholder is a creditor to the company.
Creditors enjoy a higher position in the capital structure, meaning that in the event the company becomes insolvent, the bondholders will be paid back first before any money can be paid to shareholders. While all investments carry an element of risk, this feature makes bonds inherently safer than equities.
Bonds also provide investors with a legally guaranteed income in the form of coupons. For a shareholder, dividends may be suspended at the discretion of the company. If a company were to miss a coupon payment, this is considered an event of default and the company would have to enter liquidation.
Another major difference is that shares are traded on an exchange, such as the ASX, whereas the majority of bonds are traded on the Over the Counter (OTC) Market.
The main difference between bonds and term deposits is that while funds in a term deposit are locked away for the life of the investment, a bond can be traded at any time until maturity. This gives a bond investor greater flexibility as they can enter and exit bond positions as it suits their investment needs.
Another major difference is term deposits can only be issued by financial institutions, whereas bonds are issued by many sectors of the economy such as governments, financial institutions, private corporates and public/private partnerships.
Hybrid is a term used to describe securities with characteristics of both debt and equity. An example of a hybrid would be a security paying regular income payments (like a bond) but the payments are at the discretion of the issuer (like an equity’s dividends). Upon maturity, some hybrids might be redeemed (like a bond) or converted into regular equity at the issuer’s discretion. These covenants can be different for each issue, so it’s important to understand the features of the hybrid prior to purchase.
Hybrid securities occupy a space below senior debt and above equity in the company capital structure.
Any security with a credit rating equivalent to or higher than BBB- from S&P or Fitch, or Baa3 from Moody’s is considered ‘investment grade’. Anything rated below these levels is classed as ‘sub-investment grade’.
Investment-grade credit is regarded as higher quality and is generally more liquid than sub-investment grade credit.
A high yield bond is a bond that is rated below investment grade. These bonds generally have a higher risk of default or other adverse credit events but offer higher yields than better quality bonds in order to compensate for the increased risk.
It is important for any investment portfolio to have a diversified mix of assets across industries and investment products. Allocating part of a portfolio to bonds can give exposure to a conservative, income-generating asset class that has traditionally been underrepresented in Australian investment portfolios.
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