Summary: In the listed bond market, most securities pay floating rate coupons, which helps ensure capital stability. Risks include credit risk and subordination risk, but bonds should offer a better return than term deposits. For my model bond portfolio, the current yield’s spread over the Commonwealth government bond rate is virtually unchanged from inception a year ago.
Key take-out: The portfolio has put in a sound performance, but as two senior bonds are approaching maturity, there are advantages to substituting these for two other offerings.
Key beneficiaries: General investors. Category: Investment bonds.