How to buy bonds in Australia

The name's bonds. Investment bonds.

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Bonds are a popular type of fixed return investment, with almost $79 million of exchange-traded Australian government bonds traded on the ASX in August 2026.1

When you buy a bond, you're essentially lending money to a business (corporate bonds) or to the government (treasury bonds). In return for lending the money, the bond issuer pays you a stable return over time.

Bonds are considered a relatively defensive investment, but are a common way for investors to diversify their portfolio and balance their risk profile.

How to invest in bonds in Australia

There are 2 main ways you can buy bonds in Australia:

  1. Via the Australian Securities Exchange (ASX). The ASX is the most popular way for everyday investors to trade government bonds, bond ETFs and other investment bonds.
  2. Via the over-the-counter (OTC) market. This is the most common way for wholesale investors to purchase corporate bonds, which can require a minimum investment of up to $500,000. You'll generally need to go through a broker if you want to buy OTC corporate bonds.

Can anyone invest in bonds in Australia?

Yes, it's possible for almost anyone to buy bonds in Australia.

The easiest way to invest in bonds is via the Australian Securities Exchange (ASX), but in order to get started, you'll need an account with a share trading platform or broker.

Depending on the type of bond you want to buy, there may be a minimum investment limit of $100 or $1,000.

Sign up for an ASX trading account now

You can use this table to compare share trading platforms that offer access to bond trading.

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How to buy in bonds via the ASX

If you have a share trading account, you can buy and sell bonds on the ASX like you would any regular stock.

There are 3 main ways to invest in bonds via the ASX:

1. Invest in bond ETFs

An exchange-traded fund is a bundle of securities that have been listed on a stock exchange. Bond ETFs typically track a corporate or government bond index to imitate its returns. For example, the Vanguard Australian Government Bond Index ETF (ASX: VGB) tracks the performance of the Bloomberg AusBond Govt 0+ Yr index.

Bond ETFs are arguably the simplest way for retail investors to get exposure to bonds and are available on most Australian share trading platforms.

However, it's important to note that not all fixed-interest ETFs are the same or offer a similar level of risk. Hybrid bond ETFs may contain additional riskier derivatives products, so always do your research before investing in a particular bond ETF.

2. Invest in Australian government bonds (AGBs)

Also known as treasury bonds, Australian government bonds (AGBs) are issued by the federal government. They are the most popular form of investment bond in Australia and can be bought and sold via the ASX. However, not all trading platforms will let you buy government bonds directly.

There are two types of AGB:

Exchange-traded treasury bonds (eTBs): eTBs offer fixed interest payments, which means your return doesn't change.

Exchange-traded treasury-indexed bonds (eTIBs): eTIBs offer interest payments that are tied to inflation and can fluctuate over time.

State governments also issue bonds (known as semi government bonds), but these can only be purchased through the relevant state treasury corporation.2

3. Invest in bond-focused managed funds

Managed funds are another way to get exposure to bonds. Like ETFs, managed funds are made up of investor's pooled money. This money is invested and, like the name suggest, actively managed by a professional fund manager with the goal of outperforming a certain market benchmark.

The Betashares Western Asset Australian Bond Fund is an example of a bond-focused managed fund that looks to outperform the AusBond Composite index. Managed funds generally have higher fees than ETFs.

What happened to exchange-traded corporate bonds (XTBs)?

While most bond ETFs track an index or basket of bonds, an exchange-traded bond unit (XTB) was tied to a single listed corporate bond.

XTBs were a way for regular investors to get access to corporate bonds, which are normally reserved for wholesale and institutional investors via the OTC market.

Each XTB mirrored a specific underlying corporate bond, so investors knew the income amounts (coupons) and maturity dates before they invested.

XTBs are no longer available to trade on the ASX or other Australian exchanges. The company that managed them collapsed in 2023 and the XTBs were then delisted.3

What exactly is a bond?

Simply put, a bond is a loan and you're the owner of the debt to be paid.

This loan can be to either a government or to a company. In return, you receive interest payments on your investment on a regular basis, with the principal amount paid back to you at the end of the term. The rate of return is known as the coupon rate.

Where shares normally return value as the stock markets rise, bonds act as a counterweight to a portfolio because they tend to do better when the economy is underperforming.

Why invest in bonds?

Bonds are considered a lower risk investment and are often used to balance risk in an investment portfolio. While they don't normally offer the growth potential of other assets like stocks, they provide a stable return over time.

VIDEO: How to invest in bonds in Australia

4:31

How does a bond work?

When you initially buy a bond, it is given what's known as a "face value". If you hold the bond to maturity, you receive this face value back, along with any coupon payments you were paid in the meantime.

The amount of interest you receive on your coupon payments will vary based on the type of bond you purchase:

Fixed rate bonds. The rate you are paid is fixed and stays the same until maturity.

Floating rate bonds. The rate can go up or down over the life of the bond, based mainly on how other interest rates change.

Indexed bonds. The rate is indexed against the consumer price index (CPI), which measures inflation.

You can also choose to sell a bond before maturity, but will receive the current market value instead of the original face value. However, it's possible for the market value to actually be higher than the price at the time you purchased the bond, which means you'd make a profit if you sell at that time.

How are bonds valued?

A bond’s capital value can increase or even decrease before the maturity date based on current interest rates.

If interest rates drop, you will see an increase in the value of your bonds.

When they rise, the value of your bonds will drop as a result.

The amount of interest accrued since the last payment will also have an effect on the value of a bond.

These price movements mostly affect fixed-rate bonds, and they only matter if you sell before maturity. Floating-rate bonds tend to move less in price because their coupon payments rise and fall with interest rates.

The yield-to-maturity rate is a handy way to check the potential value of a certain bond. It measures the average annual return of the bond from purchase to maturity, assuming you reinvest your coupon payments back into the bond.

Bonds are also are scaled based on how likely the issuer is to make coupon payments. The lower the risk, the smaller the reward in terms of the coupon rate. If a bond is rated triple-A, then it's considered likely that the debt issuer will pay.

Anything lower than a triple-B rating is usually considered a junk bond and the rating can go as low as D.

Basically the riskier a bond is, the higher the coupon rate is likely to be, but so is the risk that it doesn't make the payments at all.

That's why government bonds often pay a lot less than corporate bonds as the government is considered extremely likely to be able to make its bond coupon payments.

How to invest in bonds via CFDs

An alternative to buying bonds is to speculate on their price movements through CFD investing in the futures market. CFD investors seek to profit from bond price movements – whether up or down.

That means that even if bond values are falling, CFD investors can still make a profit. However, because CFDs can be highly risky and are complex derivative products, CFDs are better suited to advanced traders. You can read more about CFDs in our comprehensive guide.

However, it's worth pointing out that CFDs are more sophisticated trading products and are more risky than traditional bonds.

Bonds vs savings accounts

Bonds are often compared to savings accounts because of their relatively low risk and stable returns. However, there are some key differences in the benefits and drawbacks each offers:

BondsSavings accounts
Pros
  • Australian government bonds are considered safe due to Australia's credit rating
  • Deemed low risk
  • Could receive a higher return than savings
  • Protected by the Government Guarantee
  • Low to zero risk
  • Able to earn compound interest
  • At-call access to funds
Cons
  • Selling before the maturity date could mean a loss if bond prices have fallen
  • Interest payments are less frequent
  • OTC corporate bonds can require a high investment amount
  • Could receive a lower return than bonds

What are the risks of investment bonds?

Even though bonds are considered to be one of the least risky assets, it all depends on what you invest in.

There's a range of bonds, from triple-A rated bonds to D. A triple-A bond is usually a government-backed bond and it's incredibly likely the entity will repay. This also means the rate of return will fall as your money is theoretically more secure.

On the other end of the scale are D bonds or default bonds. These are bonds that have missed a principal and interest repayment. The risk of defaulting increases during economic downturns.

If you're looking to reduce risk, you can do so by buying higher-quality bonds.

Another key risk to bond investors is rising interest rates. Usually, interest rate rises mean the value of a bond falls because investors can get a better return on their cash, making the bond less attractive as an investment option.

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Expert insight

"The primary consideration is interest rate risk. If interest rates continue to go up, it will reduce the value of the bond. The second consideration is credit risk which means that the issue could default. In general, corporate bonds are riskier than government bonds. The third consideration is to make sure the investor's time horizon fits the bond's maturity date, which can be anywhere from a few years to a few decades."

Tony Sycamore's headshot
Tony Sycamore
IG market analyst

Tax implications for investing in bonds

Investors who purchase bonds will be subjected to similar tax rules like any other asset class.

As such, they will be required to pay capital gains taxes on all profits made.

According to the Australian government's site, Coupon Interest Payments on exchange-traded Australian government bonds (eAGBs) are exempt from non-resident interest withholding tax.4

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involve substantial risk of loss and therefore are not appropriate for all investors. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

Frequently asked questions

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Kylie Purcell is an experienced investments analyst and finance journalist with over a decade of expertise in a wide range of financial products, including online trading platforms, robo-advisors, stocks, ETFs and cryptocurrencies. She is a sought-after commentator and regularly shares her insights on the AFR, Yahoo Finance, The Motley Fool, SBS and News.com.au. Kylie hosts the Investment Finder video series and actively contributes to the investment community as a judge and panellist. She holds a Master of Arts in International Journalism, a Graduate Diploma in Economics, and ASIC-recognised certifications in securities and managed investments. See full bio

Kylie's expertise
Kylie has written 167 Finder guides across topics including:
  • Investment strategies
  • Financial platforms
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  • Exchange traded funds (ETFs)
  • Ethical investing
  • ASX stocks
  • Stock and forex markets
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6 Responses

    Marzena's avatar
    MarzenaJune 20, 2023

    Hello,
    Are there any bonds covered by FCS $250,000.00 protection?
    Thank you kindly

      Kylie Purcell's headshotFinder
      KylieJuly 4, 2023Finder

      Hi Marzena, Australian government bonds are fully protected, backed by the government and are one of the safest investments you can make. Corporate bonds are however not afforded that same protection, unless explicitly stated. The FCS protection scheme refers to cash deposits held with banks, building societies and credit unions, rather than investment products, which can go up or down and are typically not guaranteed.

    Sumon's avatar
    SumonJanuary 21, 2020

    Hi, Thanks for the useful article. You mentioned that we could buy bonds over the counter (OTC), could you provide some details – where to buy government bonds over the counter?

      Nikki Angco's avatar
      NikkiJanuary 22, 2020

      Hi Sumon,

      Thanks for your comment and I hope you are doing well.

      You are able to buy bonds over the counter from a broker or fund manager. Hope this helps and feel free to reach out to us again for further assistance.

      Best,
      Nikki

    Dan's avatar
    DanJune 26, 2017

    Say there is a severe global financial crisis (much worse than 2008 GFC) and the Australian Government cannot or decides not to meet its obligations under Australian Government Guarantee Scheme would a deposit in Australian Government bond be safer?
    Many thanks, Dan

      Jonathan's avatar
      JonathanJune 27, 2017

      Hi Dan!

      Interesting question you have there! :)

      Bonds, even government bonds carry a little risk than the average deposit account, because of they are influenced by several economic factors and political instability. But compared to savings account, interest payments or also known as “coupon payments” are usually higher.

      Most savings account have fixed rates and are covered under Australian Guarantee. But their rates are lower than bonds.

      This is where diversification and thorough research are both very important. Different precautions you might take are to never “put all your eggs in one basket”, invest in different bonds if you’re uncomfortable with stocks, and spreading out your deposits.

      IF you’re uncertain about the strategy you’d take, you may speak to a financial adviser.

      Hope this helps.

      Cheers,
      Jonathan

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