Investors should consider International Bonds for the following reasons:
- The US Government politically seems to have less stability by the day.
- In this low rate environment, people are often seeking higher interest rates.
- It’s current wisdom that through proper diversification you can reduce risk.
- Many believe the US Dollar currency could decline in value due to government spending.
- Many other international debt issues have preformed far better than both the US Government and US Corporate debt.
Currently, we recommend that higher net worth individuals take a look at Australia. Buy or get a quote here for International Government and Corporate bonds, including Australian bonds. Investors are often surprised at how easy it can be to buy/invest in foreign government and corporate securities.
Australia Economy
Australia’s (AUD) GDP is slightly higher than many industrial nations such as UK, Germany and France in terms of purchasing power parity (PPP). The country has provided both a very productive economy judged by the PPP and a very high quality of life being ranked second with the United Nations in 2009. Australia has also provided more economic focus in developing their vast levels of commodities and resources to grow their economy.
Since 2000, the agrarian and resources economies, like Australia, have seen nice rebounds in their economy. For example, Australia’s rate of 3.6% of GDP for over 15 years is well above the average of 2.5%.
Australia has experienced persistent deficits since World War II, but it has become well maintained where in 2009-10 the deficit of $57.6 billion was 4.9% of GDP.
Australia is a major exporter of wheat, wool, materials, iron, ore, gold and coal. With the natural resources providing about 3% and 5% of GDP, they are a major part of Australia’s exports. Japan, China, South Korea, India and the USA are among their top importers.
Australia Government Debt
Australia Government bonds receive superb ratings (Aa3/ AAA).
Yields (updated March 30, 2010):
2011 Yield to maturity 4.490
2012 Yield to maturity 4.950
2013 Yield to maturity 5.245
2014 Yield to maturity 5.427
2015 Yield to maturity 5.507
Since Australia’s debts are in the 5% range, the yield premiums for Australia Government debt is about 3.25% higher than US Treasury debt for the same 5-year maturity. This is over double for a comparable government AAA rated debt.
Their currency (the Australian Dollar) issues could, and will, affect future returns. Yet, America’s debt is exploding and there are many academic studies claiming that a diversified portfolio from US currency could actually reduce US citizens’ portfolios; especially if they have an over-abundance or, worse yet, 100% of their assets in US Dollars.
While working with other nations, some debt is more restrictive to US citizens than others and Australia has lower restrictions than some.
Australia Government bonds maturing in 2015 are yielding around 5.40-5.60%. Australia’s Dollar (their underlying currency) is popular with currency traders due to high interest rates in Australia, the relative freedom of the foreign exchange market from government intervention, the general stability of it’s economy and political system and the prevailing view that the Australian Dollar offers diversification benefits in a portfolio containing the major world currencies (especially, because of its greater exposure to Asian economies and the commodities cycle).
Australia Restrictions
- $10,000 minimum.
- Smaller investments size often give lower yields.
Buying in a single country increases your investment risk due to currency fluctuation and ownership of foreign debt (knowing that the volatility of each underling security is higher). But, if you properly build a diversified portfolio utilizing several countries, utilizing both government and corporate debt, the portfolio could actually reduce risk while adding significant income.
Currently, it is our opinion that the future stability of the US Dollar is at very high levels of risk for increased volatility; higher than I’ve ever seen it in my 25-year career. It’s due to the twin issues of overall US Government increases in spending, that makes a very large corresponding debt even larger, along with the great increase in political instability that appears to be growing by the day. These two titanic shifts will, in my opinion, greatly increase the underling volatility of the US Dollar, with a higher probability that the US Dollar will under-preform.
Australia on the Positive Side
Australia has one of the lowest levels of government debt as a proportion of GDP among developed countries.
Australia World Rank: 3
United States World Rank: 8
Ten Economic Freedoms of Australia
| 90.3 | Business Freedom | Avg 64.6 | 80.0 | Investment Freedom | Avg 49.0 |
| 85.1 | Trade Freedom | Avg. 74.2 | 90.0 | Financial Freedom | Avg 48.5 |
| 61.4 | Fiscal Freedom | Avg. 75.4 | 90.0 | Property Rights | Avg 43.8 |
| 64.9 | Government Spending | Avg. 65.0 | 87.0 | Fdm. from Corruption | Avg 40.5 |
| 82.7 | Monetary Freedom | Avg. 70.6 | 94.9 | Labor Freedom | Avg 62.1 |
Australia’s economic freedom score is 82.6, making it’s economy the 3rd freest in the 2010 Index. It’s overall score is unchanged from last year. Australia is ranked 3rd out of 41 countries in the Asia–Pacific region, and it’s score is well above the regional and world averages.
Sound macroeconomic policies and well-implemented structural reforms have allowed the Australian economy to weather the recent global financial and economic crisis better than many other advanced economies.
Australia on the Negative Side
The absence of a successful export-oriented manufacturer and the talk about increasing levels of government debt caused by falling tax revenues and stimulus during 2008 are proposed to continue through 2010.
Quick Facts
Population:
- 21.0 million
GDP (PPP):
- $762.6 billion
- 3.7% growth
- 2.9% 5-year compound annual growth
- $35,677 per capita
Unemployment:
- 4.2%
Inflation (CPI):
- 4.4%
FDI Inflow:
- $46.8 billion
Conclusion
Australia’s long term position as a stable economy and political system with shrewd fiscal management with an over 5% yield, or over 2 times the same comparable maturity in US debt, plus protection against a possible US decline in currency (but, at risk against a rising dollar) in this market appears doubly attractive for US investors.
Recent Australian Bonds Quotes
Please go to our:
Australia Government and Corporate Bond Articles Here
Australian Bonds Rates Sheet
Disclaimer: Durig Capital and certain clients currently do have a position in Australian bonds.
Durig.com | Investment-Income.net
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I would like to know the isin of an australian bond expiring in the 2013.
thanks
attilio
Thanks for the quote request Attilio.
The AUD Australia Government Bond comes in 10,000 min. Matures in year 2013.
Indicated Price: 103.550
Indicated Yield: 5.245
Rated: Aaa
Cusip: EC2595998
When you factor in the currency of the Australia dollar currently to American dollar, the America dollar picks up about 6.5%.
What is the price and yield to maturity of Australian Gov’t 5.75% due 6/15/11?
Hi Tom,
Thanks for the chance for a quote
Australia Government Bonds 5¾ coupon, mature 2011:
Price $101.410
Yield 4.450%
Rating Aaa
Cusip EC0229624
Randy
Please provide me a quote for…
aussie bonds, live on east coast
The 2014-2015 appear to be the sweet spot where the yields are high and maturity is still fairly short.
Always putting your interest first
Randy
AUSTRALIA GOVT DEBT INDICATIONS
—————————————————————————-
—-
Coupon 5¼
Mature 2010
Price 100.320
Yield 4.116
Rating Aaa
Coupon 5¾ 11
Mature 2011
Price 101.410
Yield 4.450
Rating Aaa
Coupon 5¾
Mature 2012
Price 101.480
Yield 4.948
Rating Aaa
Coupon 6½
Mature 2014
Price 101.380
Yield 5.454
Rating Aaa
Coupon 6¼
Mature 2015
Price 103.030
Yield 5.542
Rating Aaa
Coupon 5¼
Mature 2019
Price 96.503
Yield 5.758
Rating Aaa
Coupon 5¾
Mature 2021
Price 99.330
Yield 5.833
Rating Aaa
Does Austarlian goverment withold or levy taxes on these bond yields
Interested in Australian govt bonds. What is the markup for the bonds in amounts of 50K+. Are the bonds kept in Australian or U.S.$. How is the interest treated?
Thanks for your question Manny!
We are a fiduciary firm so we shop the best market for the best bonds, being Australian Government Bonds or elsewhere. We do not charge or take any hidden fees, like a markup. With that said we do charge a fee as low as .35% annually for bond portfolios. We work for our clients, not against them – it’s a better model.
Australian bonds are purchased in America and held at one of our three partners (TD Ameritrade, Fidelity or Scottrade), and the interest is treated as income for tax issues.
I hope we answered all your questions, but if not please let us know.
Always putting your interest first!
Hi Atul, sorry we missed your question from awhile back.
Your question was, “Does Australian government withhold or levy taxes on these bond yields?” First, I’m not a tax expert, but my understanding is that Australia charges a 10% income withholding tax or (IWT) on most fixed income, unless it’s for public use. Thus, most Commonwealth Government Securities (CGS)/Government bonds are exempt.
I hope this helps and that it makes sense. If not, though, please let me know.
Can the Aussie bonds be purchased in an IRA?
Thanks for your question, John!
Yes, Aussie bonds may be purchased in an IRA.
Always putting your interest first.
Interested in Aussie bonds , can I sell them at a higher value when they approach maturity? Who holds the interest? Is it paid out monthly? Appreciate answer Thanks.
Hi Tapati
Thanks for the question
Your Q. “can I sell them at a higher value when they approach maturity?” Possibly almost all of our international bonds have appreciated, due to a wreaking dollar, but honestly their is no guarantee.
Another good question is “Who holds the interest?” That is open, you could take it, with Aussie bonds the interest is credited to your account in Auzzie Dollars, and most bonds pay out every 6 months.
I hope this was helpful and if not let me know.
Always putting your interest first
does the 10% withholding apply to australian soverign bonds? on interest and/or capital gains? if they do withhold do you know if there is a treaty with the us that allows individuals to offset vs us taxes? thank you.
Frank,
Great questions sorry I’m late to answer it.
We have seen no taxes withheld form our Australian Government or Corporate bonds.
Always putting your interest first
randy,
are the yieds published YTM and are they net of your commission (I believe you said it was 3/8 of a point.
Alan Arsht
Hi Alan,
Thanks for your questions, they are very good.
The yields we quote are not including our fee. The last email for example was Norwegian based currency bonds with a 5.65% yield , the real quote we could purchase them that morning was on a 5.899% yield, so if we placed them at the same rate ( it almost never happens, with some certainty, they will either move up or down in yields, but we base them on the most recent fact, but that often includes a wild card of two days of volatility before we close ). With the above knowledge the bonds would of yielded 5.52% net of all fees.
We try to improve yield as much as we charge, but in most cases we are short some.
I hope this helps if not let me know.
Always putting your interest first,
Randy
and how do I purchase aussie bonds?
This is the question we like, just give us a call and we can get you Aussie Bonds.
Help! Am thinking of getting one of three visas for
Australia. I can either pay $35000, plus about $15000 in costs for a contributory aged parent visa which will take about 2 years, or wait about 15 years and a cost of about £15000 for a non-contributory visa, or I can invest $750000 for an investor visa which enables me to live in Australia for 4 years and is continuously renewable. At 64 my fixed income is important to me. Should I spend on a contributory visa, or tie up ALL my money in a government bond? And, what are the likely returns on a bond. And, where would I pay tax on the bond? Any comments?
If I already have a TDAmeritrade IRA account, if I buy an Aussie bond from you, can it just go to my existing TDA account, or must a new one be opened?
Thanks for your question Jack, Yes you can with us place bonds in your TD Ameritade account or open a new one, either.
Please give us a call we will try to work out your stated issues one by one.
Hi am exploring buying Australian 5 year Govt bond. Any implications from Singaporean investor?
That’s a good questions, even though I personally know of none. I’m not very knowledgeable about Singaporean rules. Sorry if we weren’t much help
want to invest in aus treasury bonds,cud u advise me hw 2 go abt t.plz give a break down of procedures to follow en hw i cn predict my profits.thanx
Thank you for your interest in Durig Capital. We currently work with TD Ameritrade as our primary custodian, but also have other options for our offshore clients. All equities and/or currencies are held in your own unique TD Ameritrade account, which you always have 24/7 online access to, and are not held or custodied by Durig Capital. We hold to a very different fiduciary responsibility (to always put our client’s interest first) than what is required of any broker/dealer. This fiduciary “best practices” enables us to focus on providing superior levels of advisory services, reduces conflicts of interest, and makes it very easy to quickly establish secure and trusting relationships with new clients.
One of the service that you may find of great interest is that are not only able to facilitate the purchase of higher yielding bonds through one of these custodians, but we also have the ability to find and price bonds away from the custodian should they be priced lower elsewhere. Consequently, our unique services help our clients achieve the institutional level yields like those we have written about (some of which are still available, although the yields may have changed.)
We do have additional interest in Australian gov’s and Aussie dollar denominated bonds, and will likely do another block purchase in the near future. Simply e-mail us, or call us at 877-720-3010 as soon as possible if you are interested in participating, and we will forward you everything needed to enable your participation.