Fubon Bond Investment Services

Fubon Bond Investment Services

Various Maturity Periods
Reaching Different Goals
It's Comprehensive

A bond is a debt instrument, issued by government, large corporation or other entities to raise capital. The issuer promises to pay a specified rate of interest regularly and to repay the redemption value of the bond when it matures.

 

Type of Bonds

Type of Bonds

 

By Bond Issuers

  • Corporate Bonds
    It is a bond issued by corporations, such as Hutchison Whampoa, PCCW Limited and The Hongkong and Shanghai Banking Corporation Limited.
  • Government Bonds
    It is a bond issued by a government. Examples of this type of bonds are HKSAR Government Bonds and US Treasury Bonds.
  • Quasi-government Bonds
    It is a bond issued by corporations wholly-owned by government or corporations with government as the major shareholders, such as Hong Kong Mortgage Corporation and the Airport Authority.

 

By Coupon Rates

  • Fixed Rate Bond
    A bond that pays a fixed rate of interest over the life of the bond.
  • Floating Rate Bond
    A bond that offers a floating coupon payment, which is periodically reset with reference to a benchmark yield such as HIBOR or LIBOR.
  • Zero-coupon Bond
    A bond that pays no coupon interest. It is sold at a discount from par value. Investor may earn income as the bond price moves towards par over time.
  • Callable Bond
    A callable bond gives the issuer the option to redeem it before maturity on specified dates at a specific price.

 

Pros of Bond Investment

Pros of Bond Investment
  • Stable Return
    Generally speaking, high quality fixed rate bonds can provide more stable return than common stocks. You can even earn a bond premium when the interest goes down.
  • Risk Diversification
    You can diversify your portfolio risk by investing in bonds, which are the comparatively low risk instrument.
  • A Wide Range of Choice
    Various types of bonds with different coupon rates, credit ratings and terms are available in the markets.
  • Flexible Investment Amount
    The investment amount can be as low as HKD50,000 for certain types of bonds.

 

Major Risks of Bond Investment

Major Risks of Bond Investment
  • Credit Risk
    Risk that the issuer is unable to make timely principal and interest payments in respect of the bond. Bond price changes with the perceived credit risk, which is gauged by credit ratings assigned by international rating companies such as Moody's and Standard & Poor's.
  • Interest Rate Risk
    A rise in interest rate may cause bond price to decline, thereby resulting in a capital loss if the bond is sold before the maturity date.
  • Liquidity Risk
    An inactive or illiquid secondary market may cause difficulty in selling bonds.
  • Other Risks
    Other risks associated with bond investment include call risk, inflation risk, etc.

 

Sensitivity of Bond Price

Sensitivity of Bond Price

Bond prices will fluctuate based on the issuer's credit ratings assigned by international rating companies. Moreover, the bond price and the yield move in opposite direction. When the bond price increases, the yield drops, or when the bond price drops, the yield increases. In general, bond yield and interest rate move in the same direction.

 

Example

Example
Face Value
USD100,000
Market Value
USD98,000 (market price of USD98.00 per unit)
Coupon Rate
4%
Term
3 years
Average Interest Rate
4.76% (annually)
Calculation
Interest payment annually: USD100,000 x 4% = USD4,000
At maturity, the Face Value returned:
USD100,000 - USD98,000 = USD2,000
The average interest rate after 3 years:
(((USD4,000 x 3 + USD2,000) / 3) / USD98,000) x 100%
= 4.76%

 

Frequently Asked Questions

Frequently Asked Questions

How should I choose a bond?

You should establish your personal strategy based on your appetite for risk, and taking appropriate professional advice. Other risk factor should also be considered. Higher return usually means higher risk.

Should I choose a bond with the highest coupon rate?

You should not determine a bond attractiveness by its coupon rate since bonds with higher coupon rates will be sold at a higher price than a similar bond with a lower coupon rate. Yield-to-maturity* is a better measurement to compare returns of different bonds.

 

Fubon Bond Investment Services

Fubon Bond Investment Services

Simply open an investment account with Fubon Bank for bonds trading, you can enjoy the following privileges:

  • Professional advice and information
  • No transaction fee
  • No interest and callable fee
  • No annual fee

 

Act Now!

Act Now!

For details, please visit any Fubon Bank branch or call our Integrated Customer Service Hotline at 2566 8181 (Press 3 after language selection) during office hours*.

*Monday to Friday: 9am to 7pm; Saturday: 9am to 1pm (Except public holidays).

 

Terms and Conditions

Risk Disclosure Statements:

The following risk disclosure statements do not disclose all the risks involved in this product. You should carefully consider whether trading or investment is suitable in light of your financial needs and investment objectives. You should not rely on this information alone to make any investment decision, but should read in detail the relevant product offering documents and risks disclosure statements or seek independent professional advice if in doubt.


Bond investments are not bank deposits and involve risks, including the possible loss of the principal amount invested. Bond prices may go down as well as up, and may even become valueless. It is as likely that losses may be incurred rather than profit made as a result of buying and selling bonds.

Bonds are subject to issuer defaulting on its obligations, you may not be able to receive back the principal and interest. Credit ratings assigned by credit rating agencies do not guarantee the creditworthiness of the issuer. Bonds are typically more susceptible to fluctuations in interest rates and generally prices of bonds will fall when interest rates rise. As bonds may not have active secondary markets and it may be difficult or impossible for investors to sell the bonds before its maturity. Even you can successfully sell the bonds before maturity, you may receive an amount lower than the original investment amount. If you invest in foreign currency bonds, you may be subject to the risk of exchange rate fluctuations and may incur loss if you convert the funds to local currency when there is devaluation in foreign currency. If a bond is early redeemed and you reinvest the funds in similar bonds, your return may be substantially reduced.


Beware of Tax Obligations When Investing Overseas:

Since overseas investments may involve extra tax implications, investor should seek tax advice where appropriate. For example, the US tax regime covers everyone holding US-based investments (be it marketable securities, mutual funds, or bonds, etc) in his/her own name, regardless of whether the person is a US citizen or permanent resident (so-called green-card holder).

The above information is from sources believed to be reliable, but no representation is made and no responsibility is accepted for its accuracy or completeness.

This webpage is issued by Fubon Bank (Hong Kong) Limited and the contents have not been reviewed by any regulatory authority in Hong Kong. The above information is for reference only and does not constitute, nor is it intended to be, nor should it be construed as any advice, offer or solicitation to deal in any of the investment products mentioned herein.

 

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