Maybank - Bonds & Fixed Income

Why invest in Bonds and Fixed Income Securities with us?

We are dedicated to being your trusted partner in optimising your investment portfolio and prioritising your financial goals. With our expertise in financial assets, we recognise the significance of integrating bonds and fixed income securities into your investment strategy to unlock the full potential of your portfolio. Whether you're a seasoned investor or new to the realm of finance, bonds offer unique advantages that can significantly bolster the performance and stability of your investments.

Portfolio Diversification

Diversification is the cornerstone of successful investing, and bonds play a crucial role in achieving a well-balanced portfolio. By investing in bonds and fixed income securities through Maybank Securities, you can diversify beyond traditional equities and mitigate risk. Our comprehensive range of bond offerings includes government bonds, corporate bonds and more, allowing you to tailor your portfolio to your risk tolerance and investment objectives.

Predictable Income Stream

Bonds provide a predictable income stream, making them an attractive option for investors seeking steady cash flow. Whether you're saving for retirement, funding education expenses, or supplementing your current income, bonds offer consistent interest payments at regular intervals. At Maybank Securities, we understand the importance of reliable income generation, which is why we offer a range of bond options designed to meet your income needs.

Capital Preservation
Bonds offer a level of capital preservation that equities cannot match, making them an essential component of any conservative investment strategy. Whether you're a cautious investor looking to safeguard your wealth or planning for future expenses, bonds provide the security and stability you need to preserve your capital over the long term.

Unlock Investment Opportunities with Fixed Income Margin Financing

Fixed Income Margin Financing offers investors the opportunity to magnify their investment potential by leveraging their existing bond holdings. With this financing option, you can borrow funds against your fixed income securities to increase purchasing power and expand investment opportunities. By utilising margin financing, you can effectively amplify your returns without the need for additional capital, allowing you to capitalise on market opportunities and enhance portfolio growth.

Universe of Over-the-Counter (OTC) Bonds and Fixed Income Securities

In addition, you will have access to the universe of OTC bonds and fixed income securities across various currencies, geographical segments and a range from investment grade, cross-overs and distressed bonds, allowing you to deploy your preferred investment strategies and build your ideal portfolio.

Your Trading Representative can also help you access the following information:

Availability of new primary issues of bonds and fixed income securities
Availability of secondary issues of bonds and fixed income securities
Two-way (bid and ask) prices
Market colour and price movements

How it Works

Trading of most OTC bonds and fixed income securities are open to ALL investors, subject to minimum trading denominations.

Types of Bonds and Fixed Income Securities:

i. Listed on SGX-ST

Subject to minimum trading denomination

ii. Over-The Counter (With Listed Tranche on SGX-ST)

Subject to minimum trading denomination

iii. Over-The-Counter (Without Listed Tranche on Exchanges)

Please note that OTC bonds and fixed income securities are quoted on a clean price basis, where accrued interest is computed separately.

Risks of Investing in Bonds and Fixed Income Securities

The returns on bonds and fixed income securities are driven by several factors including but not limited to market risks, issuers' credit risks, liquidity risks and call risks.

Investors should consider the following risks which are applicable to investing in bonds or fixed income securities:

Market Risks

Similar to stocks, the value of bonds or fixed income securities fluctuate with changing market factors such as interest rates, inflation rates, exchange rates and commodity prices. Investors should also be aware of liquidity risks, especially when deciding to sell a bond or fixed income security prior to the maturity date.

Credit Risk

This risk involves the issuer not being able to meet its obligations in terms of coupon/dividend payments or not being able to repay the principal amount to the investor at maturity. This is also known as issuer risk or default risk.

Liquidity Risk

This is the risk of not being able to execute a trade at the time and price that the investor so desires. It describes a situation where the investor is forced to accept a significantly discounted price when he or she wishes to sell due to the lack of ready buyers, or faces a higher price when he or she wishes to buy due to the lack of ready sellers (lack of liquidity).

The OTC market is often preferred due to the presence of liquidity. OTC bid-offer spreads are also more favourable due to the difference in the price quoting system for OTC bonds (clean price) and SGX-ST listed bonds (dirty price).

Foreign Exchange Risk

When the bond or fixed income security is priced in a currency that is different from the investor's functional currency, the investor is exposed to foreign exchange fluctuations, which will either enhance or erode the investment returns on the bond or fixed income security.

Call Risk

This is the risk that the bond or fixed income security with a callable feature is called by the issuer. The lower the market interest rate, the higher the possibility that the issuer will call back the bond or security so that he can re-issue the debt at a lower cost. This is disadvantageous to investors because of the uncertainty of cash flow and potential exposure to reinvestment risk at a lower interest rate.

Margin Call Risks

If you are financing your bonds or fixed income securities using margin financing, a margin call might be triggered in cases of adverse price movement or collateral valuation downgrade due to adverse credit events. You will be required to provide additional cash or marginable securities as collateral or liquidate positions within the specified period, failing which we will automatically liquidate outstanding positions to bring the margin ratio to 140% or above. If the OTC bond position has to be liquidated, it will be liquidated per tranche of either SGD250,000 for SGD issues or USD200,000 (or equivalent) for other currency issues.

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FAQs

What are bonds and fixed income securities?

Bonds and fixed income securities are debt instruments issued by governments and corporations.

What is the difference between of listed and unlisted bonds and fixed income securities?

Listed and Unlisted Bonds and Fixed Income Securities
Bonds and fixed income securities can be listed or unlisted. Examples of locally listed bonds and fixed income securities can be found on SGX-ST's Fixed Income Board, with domestic and foreign issuers including sovereigns (e.g. Indonesia), statutory boards (e.g. HDB/LTA) and corporations (e.g. DBS/Capitaland).

Between Listed and Unlisted Bonds and Fixed Income Securities
There are 2 key distinctions between listed and unlisted bonds and fixed income securities:

Pricing Conventions
Listed bonds and fixed income securities on SGX-ST are quoted on a 'dirty' basis, where the accrued interest on the next coupon payment is factored into the price. Unlisted/OTC bonds and fixed income securities are quoted on a 'clean' basis, where the price does not include accrued interest.

Dealing Size
The OTC bonds and fixed income market typically deals with a larger minimum ticket account size. Hence, it often experiences better liquidity.

Bonds & Fixed Income