Introduction

Investing in bonds is a crucial component of a well-balanced portfolio, offering income, stability, and diversification. However, many Australian investors are unaware of the different ways to access bonds. Unlike shares, which are easily traded on the ASX, bonds have multiple avenues for purchase, including direct bond markets, exchange-traded funds (ETFs), and managed funds.

In this episode, we’ll explore:
📌 How retail investors access bonds in Australia
📌 The differences between ASX-listed bonds, over-the-counter (OTC) bonds, and ETFs
📌 The pros and cons of each approach for different investor profiles

By the end, you’ll have a clear understanding of how to invest in bonds in Australia and choose the right method for your portfolio.

 1. Buying Bonds on the ASX – Simplicity and Accessibility

The Australian Securities Exchange (ASX) provides a straightforward way for investors to access fixed-income investments. Bonds listed on the ASX trade similarly to shares, making them accessible to retail investors without the need for large capital outlays or institutional connections.

📌 Types of ASX-Listed Bonds
✔ Exchange-Traded Bonds (XTBs) – Individual corporate bonds packaged as tradeable securities.
✔ Floating Rate Notes (FRNs) – Bonds with interest payments that fluctuate based on a benchmark rate (e.g., BBSW).
✔ Treasury Bonds & Treasury Indexed Bonds (AGBs & TIBs) – Government bonds listed on the ASX for retail investors.

📌 Example: Buying Australian Government Bonds (AGBs) on the ASX
✔ Investor purchases an ASX-listed government bond at a price of $101 per unit.
✔ The bond pays a fixed coupon rate semi-annually.
✔ At maturity, the investor receives the face value of $100 per unit, plus any accrued interest.

💡 Key Takeaway: ASX-listed bonds are easy to trade, making them ideal for investors seeking liquidity and convenience. However, selection is limited compared to the broader bond market.

 2. Over-the-Counter (OTC) Bonds – Access to a Larger Market

The over-the-counter (OTC) market allows investors to buy bonds directly from brokers, fund managers, or banks. The OTC bond market is significantly larger than the ASX, offering access to a wide range of government and corporate bonds.

📌 How OTC Bond Trading Works
✔ Investors purchase bonds through a bond broker or financial institution.
✔ Bonds are customizable, with a range of maturities, yields, and credit qualities available.
✔ Minimum investment sizes are typically higher, often starting at $50,000 per bond.

📌 Example: Purchasing a Corporate Bond OTC
✔ An investor buys a $100,000 NAB corporate bond maturing in 5 years with a 5% coupon rate.
✔ Interest payments are made twice a year until maturity.
✔ At maturity, the investor receives the full principal amount.

💡 Key Takeaway: The OTC bond market offers a much wider selection of bonds than the ASX, but it typically requires a larger investment and direct engagement with brokers.

 3. Investing in Bond ETFs – A Diversified Approach

For investors who want exposure to bonds without purchasing individual securities, bond exchange-traded funds (ETFs) offer an efficient and diversified option. Bond ETFs pool multiple bonds into a single tradeable security, providing instant diversification and liquidity.

📌 Types of Bond ETFs Available in Australia
✔ Government Bond ETFs – Focused on Australian Treasury Bonds (e.g., IAF – iShares Core Composite Bond ETF).
✔ Corporate Bond ETFs – Invest in investment-grade corporate debt (e.g., CRED – BetaShares Australian Investment Grade Corporate Bond ETF).
✔ High-Yield & Global Bond ETFs – Provide exposure to riskier, higher-yielding bonds across global markets.

📌 Example: Buying a Bond ETF on the ASX
✔ An investor buys units in the IAF ETF, which tracks the Australian Government Bond Index.
✔ The ETF pays monthly or quarterly distributions, reflecting the bond portfolio's interest payments.
✔ Investors can buy or sell ETF units anytime on the ASX, offering more flexibility than traditional bonds.

💡 Key Takeaway: Bond ETFs provide easy access to diversified fixed-income exposure with low minimum investment requirements and high liquidity.

For investors looking to access bonds directly with expert guidance, Gilt Investments offers a seamless way to enter the fixed-income market.

Gilt Investments: Your Gateway to Fixed Income Markets

At Gilt Investments, we specialize in providing retail investors with direct access to a broad range of fixed-income securities, including government bonds, corporate bonds, floating rate notes (FRNs), and inflation-linked bonds. As a leading fixed-income brokerage, we bridge the gap between wholesale bond markets and individual investors, offering opportunities traditionally reserved for institutional players.

📌 Why Choose Gilt for Fixed Income Investing?
✔ Direct Market Access – Invest in high-quality bonds without the need for intermediaries.
✔ Wide Selection – Access Australian Government Bonds (AGBs), state-issued semi-government bonds, corporate debt, and global fixed-income opportunities.
✔ Competitive Pricing – Transparent pricing and institutional-grade execution for retail investors.
✔ Expert Support – Our team of fixed-income specialists helps investors navigate bond markets with confidence.

💡 Key Insight: Whether you're seeking portfolio stability, predictable income, or inflation protection, Gilt Investments provides a seamless way to diversify your portfolio with bonds, ensuring your fixed-income strategy aligns with your investment objectives.

🔎 Get Started Today – Contact Gilt Investments to explore fixed-income opportunities tailored to your financial goals.

📌 Coming Up Next…

Next, we’ll explore "Bond Ratings Explained: What Do AAA, AA, and BBB Mean?", covering:

✔ How credit ratings influence bond yields and risk.
✔ The difference between investment-grade and junk bonds.
✔ Why bond ratings matter when selecting fixed-income investments.

🔔 Stay tuned for more fixed-income insights! 🚀📈