Government and semi-government bonds are securities which:
Some authorities, including the Reserve Bank on behalf of the Australian Treasury, issue indexed bonds. The following table describes the two types of indexed bonds.
Type |
Description |
Income |
The rate of interest paid each year varies regularly according to changes in the consumer price index. |
Capital |
The capital value may increase from time to time, in line with the average weekly ordinary time wages rate. The rate of interest is normally low at around 2% to 3% per year, but is applied to the changing capital value. |
The following table describes the three values associated with government and semi-government bonds.
Value |
Description |
Face value |
The amount that will be repaid to the pensioner at the end of the term. For example, a pensioner buys a $10,000 face value semi-government bond. If they hold this bond until its maturity, they will receive $10,000 from the relevant semi-government authority. |
Purchase price |
The amount of money that the pensioner actually pays for the bond. For example, a pensioner pays $9,800 for a $10,000 face value bond. |
Market value |
The amount that the pensioner can receive if they sell the bond. For example, a pensioner pays $9,800 for a $10,000 face value bond and 6 months later approaches a fixed interest dealer to obtain a price for the bond. Due to changes in market conditions, the dealer offers the pensioner $9,600 for the bond. More ? [3] |
The market value of government and semi-government bonds changes in response to market conditions, particularly changes in interest rates. The value of government and semi-government bonds is reviewed:
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16142%23comment-form
[2] https://clik.dva.gov.au/book/export/html/16142#tgt-cspol_part9_ftn485
[3] https://clik.dva.gov.au/book/export/html/16142#tgt-cspol_part9_ftn486
[4] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/95-deeming-provisions/954-deeming-savings-investments/deemed-income-savings-investments
[5] https://clik.dva.gov.au/book/export/html/16142#ref-cspol_part9_ftn485
[6] https://clik.dva.gov.au/book/export/html/16142#ref-cspol_part9_ftn486