One of the most common questions we receive from advisers is whether to use floating rate or fixed rate bonds in their client’s portfolios.
We look at 3 key considerations to help you with this decision.
1. The Range
Within the fixed income universe the large majority of bonds have fixed coupons. Floaters are mostly higher-rated bank bonds with lower yields. Bonds with higher yields tend to be non-bank and fixed-rate.
So irrespective of fixed v. floating, lower-rated names like Alumina or Downer should have higher yields than NAB or BoQ.
2. Your Investment Timeframe
3. Your view on Interest Rates