In April/May 2013 it is expected that Australian Government Bonds (AGBs) will commence trading on the Australian Securities Exchange (ASX) alongside existing quoted securities. Exchange-Traded AGBs will offer a convenient and readily accessible way for investors to invest in Australian Government Bonds. The big advantage of AGBs is that they can be purchased in much smaller parcels than those available in wholesale markets.
AGBs will enjoy the benefits of a listed security by providing all investors with liquidity and access to a high quality low risk government backed security. Retail investors will now have the opportunity to diversify their investment portfolios beyond traditional equities, property and fixed income assets. AGBs will particularly appeal to those seeking a regular and stable income stream and wishing to reduce volatility in their investment returns.
Two types of AGBs will be listed on the ASX.
Treasury Bonds – these provide a fixed annual interest rate over the life of the security with interest payable every six months. The face value will equal $100.
Treasury Index Bonds – the face value will equal $100 plus an adjustment for movements in the Consumer Price Index (CPI). A fixed rate of interest is paid quarterly on the adjusted face value and on maturity investors will receive the adjusted face value.
Exchange-traded AGBs will trade in the form of Chess Depositary Interests (CDIs). The minimum parcel size will be one Exchange-Traded AGB at the price quoted. They will adhere to the wholesale market calendar for determining the ex-interest date. Registered holders of Exchange-Traded AGBs at the Record Date will be entitled to the next Coupon Interest payment. The record date will be eight calendar days prior to the Coupon Interest Payment Date. If this day is not a Business Day, the preceding Business Day is the Record Date.