Interest rate duration is a key fixed income concept, as it measures the sensitivity of a bond’s price to changes in interest rates (or bond yields). Duration risk stems from the fact that a bond investor makes a payment today in exchange for a series of future interest payments. At the...
There are different levels of debt or bond investment in companies. The level that you invest in will be dependent on the risk you are prepared to take and the return you want to achieve. The lowest risk and highest quality investment in any single company is secured senior debt...
Residential Mortgage Backed Securities (RMBS) are securities that help financial institutions fund operations. Simply, residential mortgages are pooled together and sold through a special purpose vehicle to investors in the over the counter fixed income market. The funds are then funneled back to the institution, so it can on-lend to...
Returns on investments just keep getting lower. As cashed-up investors look to alternative investments, fixed income funds have been beneficiaries. Fortunately, some funds have been sympathetic to investors’ plight and the need for income and dropped fees accordingly. However, others persist with a high fee agenda, are the fees worth...
Non-government debt, also known as credit or corporate bonds, is a key part of the broader fixed income universe. Historical performance data shows that credit has favourable risk and return characteristics that can complement an allocation to cash, government debt, and riskier assets such as equities. However, credit is a broad...
Credit ratings are important indicators of risk and return in fixed income markets. They give investors an indication of the perceived future risk they are taking and measure the perceived risk of future failure to pay promised income or capital at maturity. A high credit rating, in the AAA, AA or...
Every company has a capital structure. It tells liquidators the priority of payments in a wind up or liquidation scenario. It is important to understand that bonds can sit in three different positions in the structure and each position has a consequence for risk and reward. The lowest risk position...
One of the greatest advantages to ETFs is their liquidity. In fact, even when there isn’t a great volume of ETFs being traded on the exchange at a point in time, the ‘open-ended’ nature of ETFs mean that they should still be at least as liquid as the underlying...
An ETF is an open-ended investment fund, similar to a traditional managed fund, that is traded on the ASX – just like any share. ETFs aim to closely track the performance of a given index or asset class and provide the returns of that index or asset class –...
As more Australians increase their allocations to government and corporate bonds, it is important to understand the two different ways you can make an investment. Just like shares, you can either buy and sell them directly or you can have someone else manage them for you. In the fixed income...

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Crown subordinated notes

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fixed income indices

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