Returns on all investment classes are low making it more important than ever to tap options offering higher returns with acceptable risks
For years we have been suggesting interest rates would be lower for longer and it seems other commentators now agree. Unfortunately, this means it is getting harder and harder to find investments with decent returns.
One article I read this morning suggested bonds were paying less than 3%pa. That is only partly true. Commonwealth government bonds are paying less than 3%; 10 year bonds are paying a low 2.47% pa and three year bonds just 1.86%pa.
However, there was no mention in the note of corporate bonds and there are quite a few that do earn over 3% per annum, so I thought I’d list a few. These bonds are all available to retail investors.
19 December 2016 update
Since April 2016, nine of the 14 bonds have risen in price, and are shaded in green. Included in the nine is the CBL Corporation 2019 bond that was called in October, at an amount equal to 107% of the outstanding principal amount or capital price of $107.00.
The Adani Abbott Point Terminal May 2020 bond price increased the most out of the 14 listed, from $88.00 on 12 April to par of $100.00 as of 16 December; a rise of 13.63%. Other infrastructure bonds such as the Praeco 2020 and Dalrymple Bay Coal Terminal 2021 rose in price to $111.70 and $91.55 respectively at 16 December, from $108.20 and $84.84 at 12 April.
We also note an uptick in price from five corporate bonds listed: the G8 Education 2018 and 2019, Dicker Data 2020, Qantas 2022 and 360 Capital 2019.
Inflation linked bonds lost favour over the eight months, dropping in price. The inflation linked Sydney Airport 2020 and 2030 bonds decreased slightly. The 20s from $140.83 to $140.17 and the 30s from $121.80 to $120.98
The longer dated indexed annuity JEM NSW Schools 2035 and Royal Women’s Hospital 2033 bonds declined by more in part reflecting higher longer term interest rate expectations. The JEM bonds moved from $100.53 to $96.98 and Royal Women’s from $94.04 to $93.12. All inflation linked and indexed annuity bonds are shown with a face value of $10,000.
Retail bonds offering more than 4% pa returns
| Issuer | Call/ maturity date | Bond type | Yield to maturity (pa) as at 12 April 2016 | Running yield | Capital price as at 12 April 2016 | Face value | Capital value |
| Yield to maturity (pa) as at 16 December 2016 | Capital price as at 16 December 2016 |
| Adani Abbott Point Terminal | 29/05/2020 | Fixed | 9.70% | 6.93% | 88.000 | $10,000 | $8,800 | | 7.10% | 100.00 |
| CBL Corporation | 17/04/2019 | Fixed | 5.97% | 7.77% | 106.200 | $10,000
| $10,620
| | called bonds in October 2016 | called bonds in October 2016 at 107.000 |
| Dalrymple Bay Coal Terminal | 09/06/2021 | Floating | 6.07% | 3.09% | 84.844 | $10,000
| $8,484
| | 4.98% | 91.553 |
| Dicker Data | 26/03/2020 | Floating | 6.59% | 6.68% | 100.200 | $10,000
| $10,020
| | 6.10% | 101.600 |
| G8 Education | 07/08/2019 | Fixed
| 6.61% | 7.42% | 103.050 | $10,000
| $10,305
| | 6.16% | 103.550 |
| G8 Education | 03/03/2018 | Floating | 6.26% | 6.24% | 99.500 | $10,000
| $9,950
| | 5.58% | 100.200 |
| JEM (Southbank) | 28/06/2018 | Fixed | 4.25% | 6.32% | 104.966 | $10,000
| $10,497
| | 3.55% | 104.533 |
| Praeco | 28/07/2020 | Fixed | 5.00% | 6.59% | 108.200 | $10,000
| $10,820
| | 3.65% | 111.700 |
| Qantas | 19/05/2022 | Fixed | 4.64% | 6.66% | 116.343 | $10,000
| $11,634
| | 4.32% | 116.390 |
| Sydney Airport | 20/11/2020 | Inflation linked | 5.30%# | 3.62% | 140.837 | $13,548 | $14,084
| | 5.42%# | 140.179 |
| Sydney Airport | 20/11/2030 | Inflation linked | 5.97%# | 3.26% | 121.805 | $12,709 | $12,181
| | 6.09%# | 120.986 |
| 360 Capital | 19/09/2019 | Fixed | 6.47% | 6.81% | 101.300 | $10,000
| $10,130
|
| 5.37% | 103.850 |
| Issuer | Call/ maturity date | Bond type | Yield to maturity (pa) as at 12 April 2016 | Running yield | Capital price as at 12 April 2016 | Face value | Capital value |
| Yield to maturity (pa) as at 16 December 2016 | Capital price as at 16 December 2016 |
| JEM NSW Schools | 28/11/2035 | Indexed annuity | 5.41%# | 3.84% | 100.539 | $10,000 | $10,054 | | 5.62% | 96.986 |
| Royal Women's Hospital | 30/06/2033 | Indexed annuity | 5.96%# | 4.26% | 94.041 | $10,000
| $9,404
| | 6.07% | 93.125 |
Source: FIIG Securities
Note: Prices accurate as at 12 April 2016 and 16 December 2016 where specified, but subject to change
# Assumes inflation at the RBA target mid point of 2.5%
The table contains a range of risk and return parameters. The yield to maturity will in part help you determine which bonds are higher risk, although you can also search the internet for information on the company or read the FIIG research which can be found on the WIRE website, www.thewire.com.au.
In the coming weeks, we will publish bonds with other parameters, such as wholesale low and high yield, short dated, inflation linked and floating rate notes.
Note: Minimum initial purchase is $50,000. For more information please call your local dealer or call us on 1800 01 01 81.