Risks of eTBs
Listed below are some risks associated with investing in Exchange-traded Treasury Bonds (eTBs). You should consider these issues when deciding whether to invest in eTBs.
- Changes in market price
- The market price of eTBs will vary over time in response to a variety of influences, particularly in response to changes in the general level of interest rates. In general, if interest rates increase the price of an eTB will fall. Conversely, if interest rates fall the price of an eTB is likely to increase. If eTBs are purchased for a price greater than $100 or sold prior to their Maturity Date it is possible for capital losses to be realised.
- Conversion by Australian Government
- The Australian Government may at any time, subject to a minimum period of three months’ notice, convert holdings of eTBs to the underlying Treasury Bonds directly registered in the Commonwealth Stock Registry. If this occurred you would continue to receive the same Coupon Interest Payments and Face Value amounts you were entitled to with the eTBs but would not be able to sell your investment in Treasury Bonds on the Australian Securities Exchange (ASX). For example, the Australian Government could decide to convert holdings of eTBs to the underlying Treasury Bonds if the agreement between the Australian Government and ASX for the trading of Australian Government Bonds on the ASX is terminated.
Note: This is not an exhaustive list and risks will vary between investors. The Australian Government does not guarantee the investment performance of eTBs and will not compensate investors for investment losses.