Exploiting low rates 4: Playing the listed bond market

Most investors are new to listed bonds, but careful research can produce better than average returns.

Summary: ASX listed bonds have been popular among investors searching for yield, with many trading at prices above their face value. But returns vary across different types of bonds. An empirical assessment of relative value showed that at the end of February, almost two thirds of the bonds were relatively cheap and one third were relatively expensive.

Key take out: A trading strategy of buying one of each of the cheap bonds and selling one of each of the expensive bonds would have returned 6.25 per cent annualised, at least for March.

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