Bonds

Generate a Passive Income from Bonds


Bonds are a form of fixed-income securities issued by governments or companies to raise funds from the financial markets. Most bonds pay a steady stream of interest income at regular intervals throughout the tenor of the bond. The interest income is also known as coupon rate, and is expressed as a percentage of the face value of the bond.

The primary determinants of a bond’s coupon rate are:

  • Credit quality of the bond issuer
  • Duration of the bond
  • Interest rate environment in general

Investors who want a regular income stream and/or to diversify their portfolio of investment assets can consider bonds as an alternative investment product.




Benefits

Regular income stream

Most bonds* pay regular and fixed interest payments to the investor.

*Except for zero-coupon bonds and floating-rate bonds


Wide selection of high-grade to high-yield bond issuers

To satisfy a wide range of investor’s risk appetite – more conservative investors can invest in high-grade bonds (typically government or government-linked bonds), while investors with higher risk appetites can invest in high-yield bonds.


Capital appreciation potential

Positive developments such as a bullish economic outlook or improving credit matrix of a bond issuer could lead to higher bond prices


Portfolio diversification

Bonds as an alternative investment product can help reduce risk concentration in any one asset class within a portfolio





Risks

Default risk

An investor may lose all or a substantial part of the investment if a bond issuer defaults on payments.


Price and interest rate risk

Bond prices have an inverse relationship with interest rates – higher interest rates would result in lower bond prices and vice-versa. 


Credit Risk

Deterioration in the credit quality of a bond issuer would affect its repayment ability, resulting in depreciation in the bond price


Liquidity or market risk

Bonds are typically traded over-the-counter (OTC), and could result in some bonds being less liquid than others. Demand-and-supply dynamics of the market would also determine the available secondary market prices.







Apply for an account to trade Bonds

Basic Trading (Cash) Account

Trade shares and other listed securities online or with a broker.

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