An introduction to the world of XTBs
So, what are XTBs?
XTBs offer an exciting fixed income investment opportunity open to all investors. They offer access to the performance and benefits of corporate bonds, which are normally not available directly to all investors.
How XTBs work
XTBs are securities traded on ASX. They bring together the predictable income and capital stability of corporate bonds, with the transparency and liquidity of the ASX market.
- XTBs give you exposure to specific, individual corporate bonds issued in the wholesale market.
- For each corporate bond a new XTB “Class” will be quoted on ASX, each with its own ASX 6-letter code and starting with the letters YTM.
- XTBs are units in a trust (similar to managed funds and ETFs), with each Class reflecting individual bonds held in a sub-trust.
- Investors can select the individual bonds to which they wish to gain exposure.
- Investors can buy and sell them on ASX, subject to liquidity.
- Each individual XTB reflects the maturity date and coupon payment of its respective corporate bond.
- The yield and price of each XTB is expected to reflect the yield and price of the underlying bond, after fees and expenses.
- All XTBs mature at $100.
Get exposure to bonds from top ASX companies
For example, ASX-code YTMQF4 is an XTB giving you exposure to the following Qantas corporate bond:
- Underlying issuer: Qantas (QAN)
- Maturity date: 27 NOV 2029
- Coupon: 2.95% p.a.
- XTB Price: $103.56
- Face Value at Maturity: $100
- Yield to Maturity 2.56% p.a. as at 16 DEC 2019
Source: Australian Corporate Bond Company – XTB Price and YTM as at 16 DEC 2019
Buying XTBs is as simple as buying shares.
Log on to your online broker. XTB ticker codes are 6 digits and start YTM.
Find out more about How to Buy and Sell XTBs.
Key measures of a corporate bond
|COUPON RATE||FACE VALUE||CURRENT PRICE||CURRENT YIELD||YIELD TO MATURITY|
The amount returned to investors at maturity
The amount investors pay for this XTB on ASX
(coupon/price) x 100
The total return you should receive if you hold to maturity. This is the best measure for investors.
“XTBs provide a transparent and straight forward means to offer retail investors a choice of fixed income investments usually only available to institutional investors”.
Michael Elsworth, General Manager, Specialised Research, Lonsec Research