With Fixed Interest being an important part of one’s portfolio, I wanted to get your opinion on XTBs or Exchange Traded Bonds? I have used ETFs in the past to get exposure to get exposure to Bonds and High Interest but the XTB look interesting (e.g. YTMAWA, YTMQF3).
Regards
A: Thanks for the question.
Maybe – if you are comfortable with individual bond credit risk, and think that interest rates aren’t going to rise that quickly.
A couple of points to note:
- You are investing in a trust, which owns the underlying bonds;
- The product issuer takes a margin of around 40bp;
- Secondary market liquidity depends on the market makers (I haven’t been able to assess this); and
- YTMQF3 is a trust that invests in a 5 year corporate bond from Qantas. The underlying bond is trading in the secondary market at a yield to maturity of around 3.76%pa, the underling yield on the XTB is around 3.30% pa. I am not sure that this sounds particularly exciting, given the rate you can probably find on a 5 year term deposit.
The other code you quoted – YTMAWA – doesn’t appear to be correct.
Like any financial product, suggest you read the PDS carefully.
regards
