Earn up to 3.9% pa with XTBs

Are your term deposit rates feeling a bit lean? You’re not alone - rates are at record lows.

There is an alternative.

If you’re looking for a low-risk investment that provides attractive and stable income, XTBs might be the answer.

XTBs (or Exchange Traded Bond units) are securities traded on the ASX that give you exposure to the benefits of corporate bonds.

XTBs give you the security of bonds issued by some of Australia’s most prominent companies, like Qantas, Dexus, Telstra, AGL and Vicinity.

And you can buy XTBs on the ASX, just like you would buy shares.

Buy XTBs with Bell Direct for FREE (zero brokerage) until 14 December 2018.

Fatten up your cash with XTBs

Just like term deposits, XTBs give you predictable and regular income. But XTBs can also offer a higher return than most term deposits (TDs).

With a TD you’re lending your money to a bank (gov. guaranteed up to $250k). With an XTB you’re effectively lending it to a well-known ASX company.

In exchange they’ll reward you with a higher return of up to 3.9% pa at the moment - that’s 50% more than the big 4 banks will give you (Canstar One-year TD rates from the top 4 banks: Nov 2018).

We’ve hand-picked 5 XTBs that you can buy right now with Bell Direct, to show how you can achieve more income.

  • What's the rate? 

This is the Yield To Maturity (YTM) i.e. the total return you should expect if you hold the XTB to maturity.

For the Floating Rate XTB it's the Current Yield i.e. the bond coupon rate as a percentage of the price. For floating rate XTBs the coupon rates will vary when the reference rate changes. So,  it’s not possible to calculate a yield to maturity with any certainty. 

  • What's the date? 

This is the date the XTB matures.

Find out more about these available XTBs

How do XTBs work?

XTBs or Exchange Traded Bond units, provide access to the benefits of corporate bonds on ASX

XTBs offer the same convenient and transparent access investors are used to with shares.  

More than 50 bonds from top ASX-listed companies have a corresponding XTB you can trade on ASX.

The XTB has the same coupon amounts and payment dates as the actual bond. And its performance will closely follow the bond.

Make your money work harder than a Term Deposit

Make your money work harder than a Term Deposit

If you’re thinking about XTBs to get a better rate than TDs, you’re probably wondering how they stack up.

When you invest in XTBs:

  • You can get higher return than TDs for slightly more risk.
  • You can match your investments to your cash flow requirements with a regular and predictable income stream.
  • You don't need to invest your entire savings, investments start from as little as $500 in each XTB.
  • You can choose from many corporate bonds, previously only available to institutional investors.
  • You can sell your XTBs as easily as shares on the ASX. They benefit from the liquidity of ASX.
  • You can diversify your portfolio and your SMSF investments easily through XTBs.
Risk v.s. reward

Risk v.s. reward

XTBs give you extra yield for the extra risk of lending your money to a company v.s. a bank TD with its government guarantee.

The XTB may have longer before it matures, but you can sell it on ASX at any time. Unlike your TD there are no exit clauses and prices are relatively stable.

XTBs can provide up to 50% more return than a 1-year TD from one of the big 4 banks (Canstar One-year TD rates from the top 4 banks: Nov 2018).

 

What are the key benefits?

  • interest paid semi-annually in arrears;
  • ​interest paid as 100% cash;
  • interest is not deferrable nor are interest payments discretionary;
  • rank equally with all other senior and unsecured creditors of the Issuer.

Know the risks

The value of an investment in Bonds may fluctuate due to various factors, including investor perceptions, worldwide economic conditions, interest rates, debt market conditions and factors that may affect the Bond's financial performance.

Map your cash flow - see how much income you could earn

When deciding what XTB to choose you may want to consider:

  • What rate are you looking for?
  • Which company do you want to loan money to?
  • When during the year do you want to receive income?

With the XTB Cash Flow Tool you can plan your investment.

Calculate when you'll receive your income and when you'll get the face value of your bonds back.

Check it out here

 

Illustrative data

How to invest

How to invest

Investing in XTBs is simple.

It’s the same process as you would buy shares or ETFs, simply:

Login to your account and go to the order pad.

  • Enter the ticker code for the XTB you wish to buy (they're all 6 digits and start with YTM)
  • Choose the number of XTB units you wish to purchase (you’ll need to round up, or down as you can't buy a part unit)
  • Tick 'Market To Limit' to buy at the current market price or tick 'Limit' to set your price limit and expiry requirements

FAQs

Bonds are predictable, you know what your return will be for the life of your investment (assuming no default). Yield to Maturity is the key measure. It takes into account the price paid, the income (coupons) received and the $100 Face Value returned at maturity.

Coupon rates for bonds are locked in (subject to no default) so investors must pay more for a bond with a higher coupon rate. Find out more.

XTBs are totally transparent. For XTBs the fee is included within the price displayed on Bell Direct.

  • Fixed-rate XTB fee is 0.40% of bond Face Value ($100) x number of years to maturity.
  • Floating-rate XTB fee is 0.20% of bond Face Value ($100) x number of year to maturity.

By charging fees upfront coupon and maturity payments are not impacted. This means holding an XTB is as close as possible to holding the underling corporate bond.

Yes. There are more than 50 XTBs available from a selection of top ASX companies. The range includes a selection of Floating-Rate XTBs. View the full range.

Investors receive 100% of the interest (coupons) whilst you hold an XTB and the Face Value at maturity.

The XTB Registry (Registry Direct) makes coupon (distribution) and Face Value payments to all XTB holders via electronic funds transfer, or by cheque.

If you hold to maturity there is no cost to sell your XTB.

It’s exactly the same process to buy an XTB as it is to buy shares or ETFs. You need to know these three things:

  • CODE: The ticker code of the XTB (they are all 6 digits and start ‘YTM’). You can find them above, or on the XTB website.
  • NUMBER: Number of XTB units. E.G if you have $10,000 to invest, divide this by the unit price of the XTB for the number of full units. Please note you cannot buy a part unit of an XTB so round up, or down.
  • PRICE: To buy at current market price tick the box, or set a price limit and expiry requirements.

You should also read the relevant PDS for the XTBs you’re interested in.

It's important you read the PDS of all your chosen XTBs.

You can find all relevant XTB PDS' here

The fineprint

All online XTB trades placed before COB 14th December 2018 are free.

Brokerage will be refunded at the end of December 2018.