Government bonds

You can buy and sell exchange-traded Australian Government bonds on ASX the same way you buy and sell shares. You instruct your broker to place an order. Brokerage will be payable on the transaction. Settlement of the trade usually takes place two settlement business days after the transaction (T+2).

Your exchange-traded Australian Government bonds must be held in a CHESS account sponsored by your sponsoring broker. CHESS Holding Statements issued to you will record changes in your holdings of Australian Government bonds.

Holders of exchange-traded Australian Government bonds are generally paid regular coupon interest. This is based on the coupon rate of the bond and remains in effect for the life of the bond, even as its market price fluctuates.

Investors who hold exchange-traded Australian Government bonds at the close of business on the record date (eight calendar days prior to the interest payment date) will be entitled to the next interest payment. The settlement period between the record date and the payment date is known as the ex-interest period. Trades which settle during this period are not entitled to the next interest payment.

It is helpful to note important dates such as when Australian Government bonds go ex-interest, pay coupons and mature.

You must purchase an Australian Government bond at least two business days prior to the record date (including that day) to be eligible to receive the next coupon payment. At the beginning of trading two business days prior to the record date (including that day), the price of the bond will generally adjust downwards to reflect the fact that a purchaser of the bond is not entitled to the next coupon interest payment. This is similar to a share going ex-dividend. 

There are two ways that you can recoup some or all of your initial investment:

1. Redemption at maturity: The Australian Government bond’s face value (adjusted in the case of an indexed bond) and final coupon can be paid into your bank account. Coupon payments and redemptions cannot be made by cheque.
2. Selling the bond before it matures: You can sell your Australian Government bond in the same way that you sell shares. Depending on the current market price, you may receive more or less than the bond’s face value. ASX has appointed dedicated market makers to provide bid and ask prices. Note that the quoting of an exchange-traded Australian Government bond ceases five business days prior to the final record date, which in turn is eight calendar days prior to the maturity date.