Discover a gateway to earning steady returns among our wide range of bonds. Investors who are looking for regular and stable interest income can find suitable options according to their risk profiles and needs.
What are bonds?
Bonds are issued by governments, companies and other bodies seeking to raise capital from the public. When you purchase bonds, you are essentially lending money to the bond issuer. Therefore, you are likely to receive a steady stream of coupon payments (also known as interest payments) at periodic intervals throughout the tenure of the bond. The amount you receive each time is expressed as a percentage of the face value of the bond. At the end of the bond’s tenure (when the bond reaches maturity), you would be paid 100 percent of the bond’s face value. For bonds that do not offer coupon payments (zero-coupon bonds), they are priced at a discounted rate from their face value. When the bond reaches maturity, you will receive the face value of the bond, along with the accumulated interest.
Do note that a bond’s yield is dependent on the credit quality of the bond issuer. The top quality bonds are usually issued by the government, followed by bonds from government-linked companies, banks and corporations. However, you should also take the country’s economic stature and stability into consideration. For example, an emerging market government bond may not necessarily be safer than a well-rated corporate bond.
Why invest in bonds?
Stable interest income
Bonds provide investors with regular and stable interest income in return for funds provided to the issuer.
Bond prices can change and may provide investors with a capital gain.This can be caused by changes in the market interest rate and the credit reputation of the issuer.
Currency exchange gain
Investors may enjoy a gain if the currency the bonds are purchased in appreciates.
Types of bonds offered by HSBC
We offer a variety of bonds to serve different needs, investment strategies and risk profiles. This is also useful for diversifying a portfolio as different types of bonds will respond differently to each market cycle.
Like any other investment, bonds may be affected by conditions such as market fluctuations, inflation and exchange rate movements.
Interest rate risk
The coupon rate of a bond may be fixed or floating, and the coupon rates of new bonds being issued can have an effect on the value of current bonds. It is important to note that the interest rate risk increases proportionately with the length of bond maturity.
Investment-grade bonds may offer lower coupon rates as they carry lower risk. As coupon rates are fixed, income from the bond is affected by inflation over time, with greater inflation risks over a longer term.
Exchange rate movements may cause changes in returns for bonds that are denominated in foreign currencies.
Risk of issuer default
If an issuer fails to make income and principal repayments due to financial difficulties, bondholders run the risk of losing their capital. Default risks tend to be higher for corporate bonds, although governments can also default.
Bonds offer different coupon rates, risks, payout and maturity options. It is important to choose one that best matches your investment objectives and risk profile.
Income from bonds can be fixed or floating, and the payments may be made periodically or at maturity. Most debt securities carry a coupon rate that is fixed as a percentage of the principal amount, with investors receiving payments quarterly, semi-annually or annually.
Assessed by credit rating agencies, credit quality reflects the abiity of a bond issuer to repay its debts. Investment-grade bonds have ratings from AAA to BBB, and usually offer lower coupon rates because default risk is lower. Higher coupon rates are usually offered with lower credit quality.
A bond reaches maturity at the specific future date when the investor’s principal will be repaid. A greater length of time to maturity is usually proportional with a higher coupon rate.
Bond prices are influenced by coupon rate, maturity, credit quality and interest rate movements. Bond prices tend to rise when interest rates are low and vice versa. Bonds can be sold at a premium when market price is above face value, and at a discount when traded below face value.
Time of investment
Bonds are mainly for medium to long-term investment. Investors should be prepared to commit for the full investment tenor as part or all of the investment could be lost if sold before maturity.
This document is provided for information only and is not intended as an offer to buy or sell securities. Opinions and estimates expressed are subject to change without notice and HSBC expressly disclaims any and all liability for representation or warranties, expressed or implied, contained herein or for omissions. As this document is circulated to all clients, the specific investment objectives, personal situation and particular needs of any specific person have not been taken into consideration. HSBC does not but may from time to time have an interest in the securities and may hold long or short positions for its own account or those of its clients.
The price of bonds can and does fluctuate, and any individual bond may experience upward or downward movements, and may even become valueless. There is an inherent risk that losses may be incurred rather than profit made as a result of buying and selling bonds. The holder of the bonds bears the credit risk of the issuer and has no recourse to HSBC unless the latter is the issuer itself. The decision to place the investment should be based on your own judgement without relying on any material provided or advice given by the bank or its representative.
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What types of bond are available through HSBC?
Bonds from HSBC can be categorised by:
- Types of issuers – corporate bonds, supranational bonds and government/quasi-government bonds
- Coupon – fixed rate bonds, floating rate bonds and zero-coupon bonds
- Credit quality – investment grade bonds
- Currency – USD, AUD, CAD, CNH, EUR, GBP, NZD and SGD
HSBC offers you a wide selection of investment grade bonds with tenors ranging from 1 to 30 years.
Do I need a large sum of money to invest in bonds?
HSBC lets you invest in a wide range of bonds with a minimum investment amount of SGD200,000++.
++ Please note the minimum and incremental investment amount varies from bond to bond. Please consult us for more details.
Call us on 1800-HSBC NOW (4722 669) in Singapore or (65) 6-HSBC NOW (4722 669) from overseas.
Do I have to hold bonds until maturity?
No. You can sell your bond before it matures and benefit from capital appreciation if the selling price is higher than the original buying price. Under normal market circumstances, HSBC will repurchase bonds bought through us at the prevailing market price. However, the buying price offered by HSBC may differ from the original selling price due to changes in market conditions. There are no exit fees if you choose to sell your bond before maturity
Assume you purchase a 5-year bond at a face value (the principal) of $10,000 and a specified annual rate (coupon rate) of 6%.
You will receive $600 (6% of the principal) per year for five years. Upon maturity, you will get your principal of $10,000 back.