The Meaning of Corporate Bonds

Corporate bonds are quite similar to treasury bonds as they include security, which bears interest. The corporate bonds are not only restricted to the upper- middle class, but everyone can benefit from it. They are issued by public as well as private companies, and contain varied kinds of policies and risks and not to forget rewards. The returns as well as the risks associated with such bonds are heavily dependent on the financial status of the company which issues these bonds. The insurance bonds are quite popular with the local masses due to various benefits offered by it. One should buy corporate bonds in order to enjoy the return on investment.

If you wish to invest in bonds then you are on a winning side of the life, and will see more money in your bank account as the interest associated with these bonds when paid to you results in more interest, and thus the story goes on, thus making you rich in a short span of time. With corporate bonds, you can save a great deal of money for your future. Australian bond yield curve is preferred by many because of the less risk factor. However, one should keep in mind that every investment has its own risks, and corporate bonds are no exception. Current bank bill swap rate is preferred by many to secure the invested many. In this article, you would be enlightened with certain tips that would come in handy while you are purchasing bonds.

If you are a new investor than buy bonds in the market for the first time on your own is stupidity, it is advisable that you consult a broker as he will be a pro, and an experienced one and would guide you better in the purchase of bonds. Investment bond calculator comes in handy when you are having trouble with the invested money. You can look for such agents on the internet or can find them in your town near by your place. It is better to select those companies that offer you bonds that are owned by the company or are controlled by them, and don’t forget to buy them at the listed price which is announced by them.

It is essential to buy the bonds of the companies that are reputed in the arena like New York Stock Exchange.

The bonds chosen by you should have the maturity date ranging from two to five years. The bonds that are long- term in nature have low interest value, and short- term bonds protect you from the possible fluctuation in the interest rates which are bound to happen due to unfavourable circumstances. Short duration bonds are quite popular with the masses as they mature rapidly than the long- duration bonds, and you are not required to pay any commission because you buy them on your own without taking help from the broker or the agent.

After reading this article, you won’t have any trouble regarding the corporate bonds.

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Government Guaranteed 10 Year Treasury Bonds

Insurance bonds are investment bonds which are offered by life insurance companies and provide single premium life insurance policy. The investors who hold these insurance bonds for more than 10 years without making any type of withdrawals are offered to receive their earnings free from any type of taxes. Important features of insurance bonds include tax deferred status, access to investments like guaranteed or protected profit funds and reducing of inheritance tax liability on an estate. These bonds offer a minimum guaranteed income for life of the plan holder and offer long term savings for high tax payers. The plan holder can potentially save tax on the earnings if the marginal rate of tax is higher than 30 percent levied on the insurance bonds. These bonds offer long term saving benefits for children as the parents can invest on behalf of the children and nominate them as future beneficiaries. Since minors are subjected to low rates of tax, this might help them in paying fewer rates of taxes while holding large investments in their own name.

Maintaining insurance bonds for 10 years would mean addition of original amount plus the net accumulated amount on tax earnings that can be withdrawn free from personal income tax and capital gains tax. The most important benefit of insurance bond is the rule of 125 percent increment. This is considered to be one of the most beneficial features of this bond which allows increment of the investments over 10 subsequent years and not paying personal income tax and capital gain tax.

Treasury bonds are common form of investments done for raising money from treasury yields and are generally sold by treasury department for paying off the debts. Treasury yields rates go down when there is a rise in the demand of treasury products and therefore are considered to be safer investment options. Treasury yields and Treasury bond values both go in the opposite direction and the yield would be on the higher side if the time frame on the treasury product will be longer. 10 year treasury bonds are debt obligations issued by the treasury department that has a term of more than one year and not more than 10 years. These types of bonds bear a stated rate of interest and the plan holder receives semi-annual interest payments.

In Australia, people take keen interest in investing in state treasury bonds like NSW treasury bonds (New South Wales treasury bonds). The yield curve is the relation between interest rate and maturity of the debt in a given currency for a given borrowed amount. The different types of yield curves include normal yield curve, steep yield curve, flat yield curve and inverted yield curve. The shape of yield curve indicated the interest of the investor expectations of future inflation and cash rates. If the bond investors require higher rate of interest for holding bonds for longer maturity, the yield curve usually slopes upwards. For the year 2005, the Australian bond yield curve has been almost close to flat or negatively sloped.

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Insurance Bonds Offering Tax Benefits

Insurance bonds are investment instruments that are offered by life insurance companies in the form of single premium life insurance policies. These bonds allow investors to save for a longer term and investors who hold their bond investments for more than 10 years without any withdrawals in between can able to receive their earnings tax free. The main features of insurance bonds include tax deferred status, access to make investments in guaranteed or protected profits funds, allows writing of investments in trust and reduction on inheritance tax liability of an estate. One big advantage of insurance bonds is to provide regular set of minimum guaranteed income during the life of the plan holder. Before 1970s, insurance companies used to offer investment bonds that can be invested in the with-profit fund of the firms. But later, these companies tried to compete with the unit trust market by offering a range of unit-linked investment funds and policies. Distribution funds were designed to provide a regular income source for investors by balancing the income generating assets like corporate bonds and properties with equities. By the year 2000, these distribution bonds had become very popular in many countries and provided another choice as low risk investment bonds.

Treasury bonds are investments bonds which have longer maturity from 10 years to 30 years. These bonds allow coupon payment system for every six months like treasury notes. Treasury bonds are issued by the national governments in the country’s own currency; where as sovereign bonds are issued in foreign currencies. 10 year treasury bonds are issued by credit institutions, national institutions, government companies and public authorities in the primary markets. In Australia, state treasury bonds like NSW treasury bonds are issued by the state and central government authorities. Underwriting is the most common process of issuing bonds. In this process, one or more number of firms or banks form a syndicate and buy an entire issue of bonds from the Issuer Company or organization. The syndicate group then re-sells these bonds to the investors. Since a bond is a formal contract for the repayment of the borrowed money with interest at fixed intervals, it is much like a loan where the issuer is a debtor, the holder is a creditor and coupon payments are the interest.

10 year treasury bonds provide the borrower with external funds for financing long term investments or to finance expenditures. Yield curve symbolizes the relation between the interest rate and debt amount in a particular currency. The different types of yield curves symbolize the changes in the economic output and growth. During the last one year or so, Australian bond yield curve for 10 year notes has declined with 60 basis points. From 1969 until 2011, the curve averaged with 8 percent and reached a high of around 17 percent in the mid of 1982. The record low of around 4 percent was noted in the beginning of 2009. The shape of the yield curve indicates the expectations of the investor regarding cash rates and inflation.

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