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What are XTBs?
You can access the benefits of ASX corporate bonds using the same platform as your shares, with your Bell Direct account and XTBs.
XTBs (Exchange Traded Bond units) are a way for investors to access the returns of individual ASX corporate bonds. They provide a listed fixed income alternative in a diversified investment portfolio.
Buying XTBs is just like buying shares. They have the same benefits of ease of access and transparency as other ASX investments you trade through your Bell Direct account.
Understanding what you’re buying and your cash flow
The key terms to be aware of when investing in bonds and XTBs:
Current Price: The price paid for the XTBs when bought on ASX.
Coupons: What you receive during the life of your XTB investment, paid half yearly or quarterly.
Coupon Rate: Reflects the amount paid as a percentage of the Face Value per XTB (i.e. 500 XTBs x 7.75% x 100 = $3,875).
Current Yield: Similar to the Dividend Yield on shares, it is the yield you will receive each year, based on your XTB Buy price (i.e. $7.75 / ($117.84 x 100) = 6.58%).
Face Value: The amount you receive at maturity per XTB (500 XTBs x $100 = $50,000).
Yield to Maturity: Reflects your overall return, based on the Current Price, receiving Coupons during the life of the XTB and the Face Value at maturity.
Discover how corporate bonds work.
Diversifying beyond cash & Australian equities with corporate bonds
Benefits of XTBs
When investing in XTBs, you get:
- Choice & access to a wide range of corporate bonds from ASX 100 companies, previously only available to institutional investors
- A regular and predictable income stream so you can match your income to your cash flow requirements
- Corporate bonds offer capital stability and greater security of capital repayment than shares and hybrids
- Available to SMSF as part of their investment portfolio
Build your XTB portfolio & calculate your income
Simply click here to start building your own portfolio of up to 10 XTBs around targeted investment themes.
You will be asked to:
1. Choose the right Starter Pack for you from the four Packs available (High yield, Cash Plus, Top Brands and Maturity Ladder) or create your own portfolio.
2. If you chose a Starter Pack, enter your investment amount which will be allocated according to the portfolio weightings across the pre-selected XTBs.
If you chose to build your own portfolio, select up to 10 XTBs and either enter an overall investment amount to be split equally across your chosen XTBs, or select individual investment amounts for each XTB.
All the XTBs currently available are listed here.
3. Calculate your cash flow using the tool on the XTB website
How do I invest in XTBs?
Investing in corporate bonds via XTBs is similar to investing in equities. Simply place an order online through our order pad.
To start trading, follow these steps:
- Use the XTB interactive table to select the XTB that meets your needs and read the relevant Product Disclosure Statement (PDS) for the XTBs you have selected.
- Login to your Bell Direct account and enter the ASX 6-letter code (starting with YTM) of the XTB product you wish to trade in the Trade icon.
- Enter the quantity or value of units you wish to buy or sell, the price and the validity of your order.
- Your order is placed; your new XTB units are transferred to your CHESS holdings and you’ll see them in your portfolio.
XTBS FAQs
What is a corporate bond?
Corporate bonds are loans to companies from investors. In return, investors receive regular interest payments.
When the loan matures, investors receive the face value amount and the final interest payment.
What are the key measures for corporate bonds?
Coupon Rate: the rate a bond will pay annually, expressed as a percentage of the face value. 5% means $5 per every $100 of face value.
Yield to Maturity (or Yield): the ‘total return’ you should receive if you buy the bond today and hold it to maturity. This metric assumes:
a) You can reinvest all coupons at the same yield; and
b) The bond issuer remains viable and does not default.
Current Yield or Running Yield: the bond coupon rate expressed as a percentage of the price.
What is an XTB (Exchange Traded Bond) unit?
- XTBs (Exchange Traded Bond units) provide access to the returns of individual corporate bonds on the ASX.
- XTBs give you the income and capital repayment of specific, individual corporate bonds (e.g. AGL, Qantas or Telstra bonds).
- XTBs trade on ASX and their performance closely follows their individual bond performance in the wholesale market and are 100% backed by the actual bonds.
- Each XTB has the same maturity date and coupon payment frequency as its corporate bond (e.g. a 3-year bond with a coupon of 5% = a 3-year XTB with a coupon of 5%).
- There are more than 50 XTBs available (including a mix of fixed and floating) across a broad range of larger ASX listed companies covering the majority of key industry sectors.
- For each corporate bond, a new XTB is quoted on ASX, each with its own ASX 6-letter code (all codes start with YTM, e.g. the AGL XTB is YTMAGL).
How do XTBs work?
- The yield and price of each XTB reflects the yield and price of the underlying bond, after fees and expenses. For fixed-rate XTBs, the fees are 0.4% of the face value each year for the life of the bond, and 0.2% p.a. for floating-rate XTBs.
- The impact of the XTB fee is to lower the yield of the XTB compared with the bond. A corporate bond trading in the wholesale market at a yield of 4.8% becomes an XTB trading on ASX at about 4.4%.
- Investors can allocate as little as $500 to each XTB selected.
Who are XTBs suitable for?
- Investors seeking a regular, reliable income stream
- Investors looking for capital stability in their investments and Self Managed Super Funds (SMSFs)
- Investors looking to build their investment portfolio via direct investments on ASX
- Investors seeking to diversify their portfolio and blend fixed income with equity and property investments
What risks should I be aware of?
- Credit risk: the risk the bond issuer defaults on coupon or principal payments
- Liquidity risk: the risk you will not be able to sell your XTBs on ASX
- Market risk: the risk of adverse market movements that impact the bond and XTBs
- Trust risk: the risk the Trust and Responsible Entity structure fails
For more information on risks, check the PDS (Product Disclosure Statements).
How much does it cost?
As the XTB trading platform is the same as the ASX equities trading platform, rates start from $15. Find out more on fees here.
