Discover the way to earn relatively steady investment income with a stable investment tool
Bonds offers the opportunity to enjoy a comparatively steady interest income and potential capital gains while diminishing investment risk. At the same time, the holding period for bonds may be longer compared to other investment products. Also, there may be a risk of being redeemed by issuer before the maturity date.
Why invest in offshore bonds?
Offshore bonds offer several key benefits:
Stable interest flow
Potential long-term capital gain
Diversified investment risk
Regular stream of interest income
What is a bond?
A bond is essentially a loan that an investor – you – gives to the issuer of the bond. In return for this loan, the issuer promises to pay interest and return the initial investment when it is due.
Bonds usually feature in every balanced portfolio. This is because they add stability and diversity due to their relatively low volatility compared to other investments.
The income potential from bonds is reflected in the coupon rate. This rate can be fixed or floating, and income payments could be made periodically or at the bond's maturity. A bond reaches maturity at a specified future date. This is when your principal investment will be repaid.
Bonds are mainly for medium- to long-term investment. So you should be prepared to commit to the full investment term. If you cash-in early, you may get back less than you invested. Also, issuer may also call back earlier than maturity date. Offshore bonds in general are actively bought and sold on the secondary market. So if the market price of your bond is higher than the purchase price, you could sell it to get capital gains.
Things to know
- A bond's coupon rate depends on the credit quality of the bond issuer. The top-quality bonds are usually issued by governments, followed by bonds from government-linked companies, banks and corporations.
- Non-investment grade bonds and unrated bonds are riskier, but offer potentially higher returns due to the higher risk premium.
- New bond issues may have an effect on the value of current bonds, and therefore your earned interest income. Interest rate risk increases proportionately with the length of bond maturity.
- Your bond value may decrease over a longer term due to inflation.
- Exchange rate movements could cause fluctuations in your return if your bond is issued in a foreign currency.
- If a bond issuer defaults due to financial difficulties, you may run the risk of losing your investment.
- “Sustainable investments” include investment approaches or instruments which consider environmental, social, governance and/or other sustainability factors (collectively, “sustainability”) to varying degrees. Certain instruments we include within this category may be in the process of changing to deliver sustainability outcomes.
There is no guarantee that sustainable investments will produce returns similar to those which don’t consider these factors. Sustainable investments may diverge from traditional market benchmarks.
In addition, there is no standard definition of, or measurement criteria for sustainable investments, or the impact of sustainable investments (“sustainability impact”). Sustainable investment and sustainability impact measurement criteria are (a) highly subjective and (b) may vary significantly across and within sectors.
HSBC may rely on measurement criteria devised and/or reported by third party providers or issuers. HSBC does not always conduct its own specific due diligence in relation to measurement criteria. There is no guarantee: (a) that the nature of the sustainability impact or measurement criteria of an investment will be aligned with any particular investor’s sustainability goals; or (b) that the stated level or target level of sustainability impact will be achieved.
Sustainable investing is an evolving area and new regulations may come into effect which may affect how an investment is categorised or labelled. An investment which is considered to fulfil sustainable criteria today may not meet those criteria at some point in the future.
Types of bonds
We have a wide selection of investment-grade bonds with maturity ranging from 1 to 30 years.
- Government, government agency, corporate, and multi-national institutional bonds
- Fixed-rate bonds, floating rate bonds, zero-coupon bonds
- Available in multiple currencies such as USD, EUR, GBP, NZD and AUD among others
The investment-grade bonds we offer are selected by our team of experts.
Find out more information on investing bond by meeting with our wealth adviser in branch.