Banks, companies and governments all issues bonds as a way of raising funds. In the Wholesale Bond market, Issuers borrow in the form of bonds (a legal debt obligation) from investors including Superannuation Funds, Asset Managers, Credit Funds and Professional investors. When a bond is purchased, the Issuer is legally obligated to pay investors interest at regular and pre-defined interest payment dates and repay the face value of the bond at the maturity date.

Bond investors are creditors of the Issuer of the bond. Bond investors are looking for a return of their capital.

Equity investors are owners of the company for which they own a share. Equity investors are looking for a return on their capital.

Interest rates affect bond prices differently.

Typically, the value of Fixed Rate bonds will rise when interest rates fall and vice-versa when interest rates rise. Fixed Rate bonds pay interest semi-annually.

Typically, the value of Floating Rate bonds will remain less sensitive to interest rate movements as the interest payment is linked to a variable benchmark that moves in line with underlying interest rates. Floating Rate bonds pay interest quarterly.

Ord Minnett generally recommends a wholesale bond portfolio with a mix of Fixed Rate and Floating Rate bonds.

The Ord Minnett Wholesale Bond Service has a minimum investment for an individual bond of $50,000.

However, it is recommended that clients have a minimum portfolio of $250,000 (consisting of five individual bonds) to provide diversity across interest rates, maturities and sector.

An individually tailored Wholesale Bond portfolio provides clients with a Defined Outcome.

Clients (with the help of Ord Minnett Fixed Income experts) will be able to choose the types of bonds that suit their individual needs.

Clients are able to use a direct Wholesale Bond portfolio to tailor a defined income stream or meet a pre-determined yield and risk profile that will provide a known outcome at the time of investment. 

Bonds typically have steady performance and defensive features. However, bonds are still exposed to: 

• Interest Rate Risk: the risk that a change in interest rates could reduce the market value of a bond.
• Credit Risk: the risk that an Issuer of a bond could default or become insolvent.
• Liquidity Risk: the risk that a bond sold before maturity could be lower (or higher) than the price paid.