Australian Bond Exchange

two people looking at our fixed income and bonds guide

There’s been a lot of noise recently in the market about fixed income and bonds, as advanced economies battle with high, sticky inflation, a lack of housing supply, and rising interest rates.

The key thing to remember is that wherever you decide to invest your money, there is always risk involved. You just need to make sure you get paid for the risk with your returns.

Generally, equities (shares/stocks) are high risk, high return, term deposits are low risk low return, and fixed income investments like bonds sit somewhere in between. 

As a defensive asset class, bonds and fixed income investments are lower risk in comparison to other investments (like equities). They’re also typically lower yield, but bond yields are rising in response to the recent RBA rate hikes. 

No matter which type of investment you choose, it’s essential to read the Information Memorandum (IM) document or product disclosure statement (PDS), and seek professional financial advice, before signing on the dotted line.

Ready to dive into the world of fixed income and bonds?


Before we dive into the world of fixed investments and bonds, let’s get you familiar with the correct terminology. Click the Glossary dropdown to see the financial jargon typically used when discussing bonds and fixed income.


Australian Government (Treasury) Bonds 


Australian Securities Exchange (Stock Exchange). A marketplace for the trading of stocks/shares/equities (ownership) of listed companies. 

Coupon rate/ Interest rate

A percentage of the face value of a bond or fixed income product, paid from the date of issue until maturity. 


Exchange-traded Australian Government Bonds 

Face value

The principal value on which coupon interest payments are calculated. 


The seller/borrower/debtor (typically a company or government). 


The buyer/lender/creditor/bond holder/ security holder 

Maturity date

The date on which the bond or fixed income product is due to be repaid. 


The Reserve Bank of Australia (RBA) is the central bank of Australia, and controls monetary policy including the Cash Rate Target. 


The annual rate of return on a bond or fixed income product. 

What are bonds?

When the government, or a company, needs capital, it can issue debt securities (like bonds) to raise the necessary funds.   

When you buy a bond, fixed income products or hybrid securities, you’re lending the issuer (a business or a government) money.  They then agree to pay you interest in return for the loan, until the maturity date. 

Bonds typically offer fixed rates of interest, with semi-annual or quarterly payments, and are seen as “defensive” assets due to the lower risk attached.

Learn more about the bond basics here.

How do bonds work?

Bonds work in a similar fashion to a loan, in that the higher the risk (the more doubt there is that the issuer can repay the debt), the more the company/government must pay in interest (the coupon rate) to bond holders/ security holders. 


Can you sell a bond before the maturity date? 

Selling a fixed income product or bond before it reaches the maturity date (matures) means you’ll get market value, instead of face value. 

Market value can be lower or higher than face value and is influenced by: 

  • Credit risk of the issuer 
  • Level of liquidity 
  • Interest rate movements 
  • Maturity Date 
picture of laptop with bond spreads and financial data

Types of Bonds & Debt Securities in Australia 

There are only two types of bonds you can buy in Australia, but many different types of debt securities that also offer stable returns. 

What are the different types of bonds and fixed income investments? 

A government or treasury bond refers specifically to a bond (that acts as a loan) issued by governments. As a highly secure investment product, second only to cash at the bottom of the risk spectrum, they have very low-risk attached and low but predictable yields.   

A corporate bond is a bond issued by a corporation or private company (that acts as a loan). These bonds are riskier than government bonds, which means they generally pay a higher rate of interest.  

There are many other fixed income products (securities) that act in a similar fashion to bonds, in that they provide predictable coupon payments and a set maturity date. 

Market-linked securities, hybrid securities and bond-linked securities are just a few examples of other fixed income instruments. 

Types of Interest on Bonds 

The type of bond issued impacts the amount of interest paid to creditors (bond holders, security holders or investors). 

There are three main types of bonds, each slightly different due to their relationship with the Reserve Bank of Australia (RBA) Cash Rate rates and inflation. 

Bond Prices: How To Buy Bonds In Australia 

There are several options for investing in bonds in Australia: 

image of trading terminal

What Affects Bond Prices? 

Two major factors cause bonds prices to fluctuate, interest rates and risk. 

Bond prices (not to be confused with bond yields) have an inverse relationship with both interest rates and risk. That means, as one goes up the other goes down. 

Bond Yield: How To Make Money From Bonds 

There are various ways in which you can gain solid yields (return on investment) from bonds and other fixed income products: 

Three Advantages of Investing in Bonds 

There are three key advantages to investing in bonds and fixed income securities: 

Before investing in shares, bonds or other securities, make sure to seek the advice of a financial adviser, as insolvency law is complex and dependent upon different factors that can impact the outcome in a credit default or insolvency event.   

The Disadvantages of Investing in Bonds

Let’s look at the downside of investing in bonds. 

Are Bonds a Good Investment? 

Investing is risky, so when you are reviewing the best type of investment for you, make sure to contact a financial adviser to get advice based on your personal and financial situation. 

If you’re considering buying bonds or other fixed income securities, here’s a few scenarios where bonds could be a good investment for you. 

You’re looking to diversify your portfolio

If you already have a significant property or shares investment portfolio, bonds can help to diversify and spread risk. By introducing debt securities and other fixed income products into your portfolio, you can feel confident in the face of market volatility. 

You don’t want too much risk 

If you don’t want a high-risk investment, bonds might be a suitable investment for you. 

Bond prices tend to be reasonably stable and are typically less risky than shares, and the downside is that your potential return is significantly lower with bonds than with shares. 

You’re retiring or are retired 

If you are retired or entering retirement, you may find a stable but conservative revenue stream is more attractive than a riskier and higher-yield investment.

Based on an average life expectancy of 81-85 years old, retiring at 60 in Australia could cost you almost $1,000,000. And that doesn’t account for inflation. 

Thinking about investing? 

We hope this guide has shed some light on everything you need to know about bonds and fixed income.  

If you’d like to learn more, request a callback here or give us a call on 1800 319 769. 

Disclaimer: This guide contains general advice only. You need to consult with your independent financial, tax and/or legal adviser, and consider your investment objectives, financial situation, and your particular needs prior to making an investment decision. Australian Bond Exchange Pty. Ltd. and its authorised representatives does not accept any liability for any errors or omissions of information supplied in this document except for liability under statute, which cannot be excluded.