DNR Capital takes on the Small Ordinaries
September 24, 2018
CBA pulls out of SMSF lending
September 24, 2018

New Telstra, Ausnet XTB listings

Richard Murphy, XTB

Australian Corporate Bond Company has topped up its list of ASX-listed XTB corporate debt securities with the listing five new XTBs, offering yields ranging from 3.4 per cent to 3.9 per cent.

The five new XTBs are:

  • Telstra bonds maturing in April 2027, with a coupon rate of 4 per cent and an indicative yield to maturity at listing on August 31 of 3.35 per cent.
  • AusNet Services bonds maturing in August 2027, with a coupon rate of 4.4 per cent and an indicative yield to maturity of 3.24 per cent.
  • Dexus Property Group bonds maturing in May 2027, with a coupon rate of 4.25 per cent and an indicative yield to maturity of 3.63 per cent.
  • Vicinity Centres bonds maturing in April 2024, with a coupon rate of 3.5 per cent and an indicative yield to maturity of 3.17 per cent.
  • Vicinity Centres bonds maturing in April 2027, with a coupon rate of 4 per cent and an indicative yield to maturity of 3.77 per cent.

The coupon rate is the rate payable on the bonds at their issue price (face value), while the yield to maturity takes the market price of the bond into account. If the bonds are held to maturity they will be redeemed at face value, even if they have been purchased for more than face value. The yield to maturity takes any capital gain or loss at redemption into account and arrives at a total return.

XTBs are securities that provide a beneficial interest in the underlying bonds. They can be bought and sold on the Australian Securities Exchange, with prices changing in response to changes in the market prices of the underlying bonds.

If they are held to maturity they will be redeemed by the issuer at face value.

They offer investors exposure to corporate bonds that would ordinarily only be available to institutional or wholesale investors. All XTBs are backed by investment grade, senior corporate debt.

Australian Corporate Bond Co has two market makers, whose job is to ensure there is liquidity in the bonds.

The company launched its first XTBs in May 2015 and has listed a total of 60 since then. With its latest listings, which are the first since November last year, it has 51 in the market currently.

Australian Corporate Bond Co chief executive Richard Murphy says investors use XTBs as a higher yielding alternative to term deposits, as a source of income.

Murphy says investors tend to buy three or four XTBs to make up a fixed income portfolio, preferring the securities of well-known issuers.