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.







View a list of indicative bond prices here.


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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