How does Fixed Income work?

Fixed Income investments, whether traditional bonds or hybrids, generally provide investors with regular income through coupon payments and, in the case of bonds, the return of principal at maturity. 

As a bond investor, you loan money to governments or companies. In return, you receive regular interest payments based on your investment, as well as your original investment amount at the end of the bond term. Much like shares, bonds can be sold before maturity. Hybrids incorporate features traditionally associated with equities, offering a different risk and reward profile.

What we offer

We provide exposure to Australian Securities Exchange (ASX) listed bonds, as well as unlisted bond and hybrid opportunities typically reserved for institutional investors. We also offer access to new issues in the primary market.

We can facilitate diversified investments across domestic and international markets, encompassing key industry sectors, currencies, and credit qualities. Our fixed income range is sourced from over 250 well renowned issuers, ensuring well-rounded, and globally diversified investment options for our clients.

Rely on our team of experts for insights and market updates, providing a deeper understanding of the bonds market. Seamlessly monitor market valuations of your bond portfolios through nabtrade, opens in new window, empowering you with the necessary tools for informed investment decisions.

Benefits

Fixed Income can play an important role in a diversified and balanced portfolio. Some of the advantages include:

Consistent income stream

Fixed Income investments can generally provide a regular and defined income stream, in the form of quarterly or semi-annual interest (coupon) payments, depending on the type of security.

Diversification

Investors can build Fixed Income portfolios according to their credit risk appetite. Bonds may be used to lower portfolio risk and counterbalance equity movements. Including hybrid securities can provide additional diversification by blending features of both equity and debt instruments.

Lower risk

Bonds are loans of the company and in the event of corporate insolvency, bond holders typically rank above shareholders when it comes to the return of capital.

Considerations

Although Fixed Income investments are generally perceived as less risky than shares, they do carry a level of risk. It’s essential to consider factors such as:

Credit risk

Bonds, essentially loans made to corporate or government entities, are particularly influenced by the creditworthiness of the issuer. Hybrids, being a combination of debt and equity features, share this reliance on the issuer’s creditworthiness. Some hybrids may also include features that allow the issuer to withhold payments under certain circumstances without constituting a default. In both cases, high-quality issuers less likely to default.

Interest rate risk

Interest rates have an inverse relationship with bonds. Rising interest rates generally mean the market value of a bond will fall and vice-versa.

Liquidity risk

Market conditions or economic events may impact the ability of investors to sell their bonds or hybrid securities. Listed hybrids are typically less liquid than ordinary shares. During adverse market conditions hybrids could be more volatile than bonds.

Fixed Income investor profile

We assist you in choosing Fixed Income options that suit your investment and diversification goals.

Eligibility requirements

  • The minimum investment amount is $50,000 or as per minimum denomination specified by the issuer
  • You can access listed bond opportunities via nabtrade, opens in new window
  • Access to the unlisted bond market is limited to wholesale investors who have signed up to the NAB Global Bond Service.

Investment type

  • Hybrids
  • Bonds

Return profile

  • Income
  • Potential capital growth

Investment horizon

  • Up to 18 months to five years and longer

To further explore Fixed Income, you can contact your investment specialist or call our Investor Desk.

How bonds can boost income flow from your investments

A key goal generally of investing in a bond is to create a stable income source. However, bonds can also play an important role in creating portfolio diversification and generally lowering portfolio risk.

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Contact us

Talk to a specialist

To explore investment opportunities, contact your investment specialist or call our Investor Desk.

Call us on 1300 683 106

 

Email a specialist

Send us an email enquiry and one of our team members will get back to you.

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For insights and research

Discover the latest thinking on investment insights, strategies and market commentary.

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The information on this website is general in nature and based on information available at the time of publishing, information which we believe is correct and any forecasts, conclusions or opinions are reasonably held or made as at the time of publishing. The information does not constitute financial product or investment advice. Past performance is not necessarily indicative of future results. No warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither National Australia Bank Limited ABN 12 004 044 937, Australian Credit Licence and AFSL No. 230686 or any of its related entities accept liability to any person for loss or damage arising from the use of this information.

You should consider the relevant Product Disclosure Statement and Financial Services Guide (available on request) before deciding whether to acquire, or to continue to hold, any of our products. Target Market Determinations for these products are available at nab.com.au/TMD and jbwere.com.au/other/resources, opens in new window. Fees and charges are payable. Terms and conditions apply and are available on request from NAB. Our credit products are subject to eligibility and lending criteria.

All products and services mentioned on this website are issued by National Australia Bank Limited ABN 12 004 044 937, Australian Credit Licence and AFSL No. 230686 (NAB), except wealth advice services, which are provided by JBWere Limited ABN 68 137 978 360 AFSL No. 341162 (JBWere), and nabtrade, which is the information, trading and settlement service provided by WealthHub Securities Limited ABN 83 089 718 249 AFSL No. 230704 (WealthHub Securities). JBWere and WealthHub Securities are wholly owned subsidiaries of NAB.

WealthHub Securities’ and JBWere’s obligations do not represent deposits or other liabilities of NAB. NAB does not guarantee its subsidiaries’ obligations or performance, or the products or services its subsidiaries offer. You may be exposed to investment risk, including loss of income and principal invested.

Information correct as at January 2024.

©2024 NAB Private Wealth is a division of National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. ©2024 JBWere Limited ABN 68 137 978 360 AFSL No. 341162. ©2024 WealthHub Securities Limited ABN 83 089 718 249 AFSL 230704.