While some bonds are low risk (eg NZ Government Bonds), others have features that make them a much higher risk. They must have a licensed supervisor who checks they continue to meet their obligations. If they buy at $800, for example, they will still get your $100 interest, which is a 12.5% yield.Ĭompanies issuing bonds must follow disclosure rules. To get a higher yield from your bond, buyers will offer less for it. So your bond may be competing with a $1,000 bond with a 12% coupon rate, which is a 12% yield. If interest rates rise, other bonds will come onto the market with higher coupon rates. If you buy a $1,000 bond with a 10% coupon rate, you are agreeing to receive $100 in interest or a 10% yield. Your adviser or broker should have information about how to review the performance of bonds from other countries. Websites like list current New Zealand bond yields. Note that bonds aren’t always traded at face value. This measure is known as the yield and is calculated by dividing the interest received by the last traded price of the bond. You can measure the performance of a bond by working out the amount of return you’ll get compared to what you paid. The yield tells you the performance of a bond. Use comparison websites to see how your bond is returning relative to other similar bonds. At the maturity date, you’ll also be paid the face value of the bond. Interest is paid over the bond’s lifespan. The bond’s interest rate, also known as a coupon, is fixed at the time of issue. You’ll get interest plus the original value of your bond. They are an income asset as you’ll receive income if you hold the bond until maturity. Zero-coupon bonds tend to go up and down in price a lot more than regular coupon bonds.īonds are also known as fixed-interest investments. Instead, you will receive a discount when you purchase the bond and hope you make a profit when the bond is redeemed at maturity. Issued outside of New Zealand in a high yield currency (such as the NZ dollar), and sold to Japanese investors.ĭoesn’t pay interest (a coupon) like other bonds. Unsecured bondholders are paid after secured bondholders when a company repays its debts. Ranked low in an issuer’s repayment list if they face financial difficulty. Ranked higher in an issuer’s repayment list if they face financial difficulty. Considered less risky than an unsecured bond. Secured against an income stream, or an asset. This usually happens when the issuer finds they can get a cheaper loan elsewhere. Can be beneficial if investors expect interest rates to rise and the value of bonds to fall.Ĭan be bought back early by the issuer, at a price fixed by them. However, issuers usually include an option to recall perpetual bonds when it suits them.Īllows investors to force the issuer to repurchase the bond at set dates before the bond matures. Issued in NZ dollars by overseas issuers.Ī bond with no fixed maturity date. Issued by companies with a strong financial position. These are usually sold to institutional investors.Īlso known as junk bonds, they offer investors high-interest payments but they are also high risk and have a high probability of payment default. An example is a bond issued by a group of banks in Singapore, denominated in US dollars, sold to international investors. The bond issuer may also be able to stop or limit the interest they pay.Īn international bond issued in Euros, or in a currency not native to the country where it is issued. Investors will lose their interest payments once this happens.Ĭonvertible/'coco's/hybrid bond/capital noteĬan be converted into another type of security such as shares, or for cash, which can be worth much less than the sum you originally invested. Offered by listed or unlisted companies raising money.Ĭan be bought back by the issuer. Financial Markets Conduct Act exemptionsīacked by another asset, such as housing loans.Business with nominated representatives.Business with financial advisers and nominated representatives.Business or individual with financial advisers.Providing advice on behalf of someone else. Financial Services Legislation Amendment Act 2019 (FSLAA).Conduct of Financial Institutions (CoFI) legislation.Offer disclosure for equity and debt offers.Interposed persons under the financial advice regime.Standards for designated Financial Market Infrastructures.
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