Fixed interest securities

Fixed interest securities, such as bonds, can be a valuable part of your investment portfolio. You can invest in them with the intention of creating an income and diversifying your portfolio. You can trade many fixed interest securities on the New Zealand Debt Market (NZDX) through ASB Securities.

Benefits at a glance

  • Fixed interest securities can provide you with a regular income, and capital repaid on maturity
  • You may be able to sell your fixed interest securities before maturity, if there is an investor willing to buy them
  • Generally less volatile than shares, helping you diversify your portfolio and spread your risk
  • Fixed interest securities can be traded like shares, in the secondary market

How it works

Fixed interest securities are like IOUs, with interest

Fixed interest securities are debt investments that pay a fixed or floating rate of return. When the government or a company wants to raise funds, they can issue bonds to investors as an alternative form of funding. The bond is like an IOU. As an investor, you are lending money to the issuer. You buy or invest in a bond and in return, the issuer intends to pay you interest and repay you in full at a date in the future. This highlights the key difference between fixed interest securities and shares. When you buy a share in a company you own a small part of that company, when you buy fixed interest securities, you become a lender to that issuer.

They are intended to provide a fixed income for a set time

The bond’s annual interest is generally paid to you as income on a regular basis. It is not reinvested. For example, if you buy a bond with a $10,000 face value today with a 10% coupon rate and maturity in 5 years’ time, you are agreeing to receive $1,000 in interest each year (or a 10%p.a. interest rate) for the next 5 years. The interest (or coupon) is generally paid to you on a quarterly or semi-annual basis, providing you with a regular income stream. It is also intended that the issuer will pay back the $10,000 face value at maturity (in 5 years' time).

You buy and sell through a stock broker

You don’t have to keep bonds for the full term; you can trade them on the market if there is an investor willing to buy. The market price of your bonds will fluctuate but the coupon payment will generally remain the same.

You can also invest in fixed interest securities when they’re first issued.

Trading may be available through the New Zealand Debt Market (NZDX) for listed securities or through the unlisted (‘over-the-counter’) market. Fixed interest securities are traded and settled in a similar way to shares, so you’ll need a stock broker such as ASB Securities to buy and sell them (fees apply).

What are the main risks?

Interest rate risk

In a rising interest rate environment, the market value of fixed interest securities tends to fall. If you have the need to sell before maturity and interest rates have increased, you may make a loss on your investment. Generally, the longer the maturity of the security, the greater the degree of interest rate risk.

Credit risk

The risk that the bond issuer fails to pay you interest or pay back the money they owe you.

Liquidity risk

The risk that you won’t be able to buy and sell fixed interest securities quickly before maturity due to a lack of buyers and sellers.

Inflation risk

There is a risk that your fixed interest investment may not keep pace with inflation.

Like any investment it’s important to do your research and ensure you understand the risks. Check out our guide on fixed interest securities to find out more about these risks.

We offer access to

Brokerage rates

Brokerage fee

Based on the capital value of the transaction, with a minimum of NZ$35.00 per trade. (If you hold your bonds until maturity, fees will only be charged when you buy.)

Reduced brokerage rates are offered on transactions with a capital value of NZ$50,000.00 or more – please call us on 0800 272 732 between the hours of 7am - 6pm, Monday to Friday or email asbsecinfo@asb.co.nz for more details.

Next steps

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Call us

Contact the ASB Securities team from 7am to 6pm NZT, Monday to Friday.

0800 272 732

+64 9 448 8120

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ASB Securities Limited is an NZX firm. When you trade on the NZX markets through ASB Securities you must comply with NZX rules as outlined in the ASB Securities Trading Conduct for Online Share trading. ASB Securities terms and conditions apply. Pricing data supplied by ASX and/or NZX. ASB Cash Management Account, ASB Foreign Currency Account, ASB Margin Lending and ASB Term Deposits are provided by ASB Bank Limited. ASB term's apply. Rates and fees may change. Refer to asb.co.nz for other fees and charges. This page does not have regard to the financial situation or needs of any reader. As individual circumstances differ, you should seek appropriate professional advice. See the ASB Securities glossary for share trading and investment terms or Morningstar for research terms. 

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