Charlie Callan.

Hybrids refer to a broad classification of securities issued by corporations that structurally contain both debt and equity characteristics. In terms of the capital structure, hybrids sit subordinated debt and above equity in the capital structure and tend to offer higher yields than senior bonds. These securities rank behind subordinated debt in the priority of payment while still enjoying the [...]

The Australian fixed income market is a significant source of funds for Australian and international corporations. Senior debt is issued by corporations to finance projects and other day-to-day business activities. These types of securities can generally take four forms:   In terms of the capital structure,   Senior Secured Covered Bonds – The obligations of a covered bond are secured [...]

Inflation-Linked Bonds (also known as ‘linkers’) can either by issued by Commonwealth of Australia, State Governments or corporations. These securities are structured so their coupon payments are linked to the current inflation rate. When coupons are set at a fixed rate, inflation erodes the purchasing power of interest payments over time. Inflation-Linked Bonds mitigate this risk and can be particularly [...]

Semi-Government Bonds (Semis) are issued by the central borrowing authorities of Australian state and territory governments. The central borrowing authorities have an explicit government guarantee from their parent state. Some of these securities also have a Commonwealth Government guarantee (made during the Global Financial Crisis). Issuance of Semi Government Bonds is primarily for budget funding and to support infrastructure investment [...]

Commonwealth Government Bonds (CGS) are medium to long term debt issued by the Treasury through the Australian Office of Financial Management (AOFM). These securities pay a fixed coupon semi-annual in arrears, which are redeemable at face value on the specified maturity date and are the most liquid fixed income security in the Australian. Bonds issued by the Commonwealth Government are [...]

Before understanding types of fixed income, investors must understand the capital structure. In its simplest form, the capital structure consists of debt and equity. Companies utilise global markets to raise debt and equity to fund growth and maintain the existing operations of the business. In the priority of payments, debt holders are ranked higher than equity holders. This means that [...]

Although fixed income is generally less volatile than other asset classes, it is not immune to fluctuations in value. While equities experience a relatively even probability of capital upside and downside, bonds and other debt securities are subject to an asymmetric price structure. This essentially means that fixed income has limited upside and substantial downside. This reiterates the importance of [...]

When describing yield, investors typically use two measures: the running yield and the yield-to-maturity (yield-to-call). Running yield is calculated by dividing a security’s most recent distribution by its capital price. On the other hand, yield-to-maturity (call) is determined by taking into account all future cashflows such as the present value of all coupon payments and the discount or premium paid [...]

In fixed income every security has a predefined period of time (term) that you as the investor is lending your money. Term is generally measured by three different parameters: the call date, the maturity date or no maturity (perpetual). • At the call date, the bond can be redeemed at the discretion of the issuer before maturity; • At the [...]